We need to take the roll. Let the record show Commissioner Cremins, Rose, Bosco, Coleman, and Dombrowski present.

In your packets, we didnít have the minutes ready, so thereís no minutes to review at this meeting.

So weíll go to the second item on the agenda right away, consideration of requests for an investigation into the working conditions of public transit drivers and other commercial drivers employed by public agencies with respect to meal and rest periods.

Letís see. Shane, do you have a card?

MR. GUSMAN: Yeah, I have one up there.

COMMISSIONER DOMBROWSKI: Oh, here. Iím sorry.

Shane Gusman.

And, Matt, do you want to come up at the same time?

MR. GUSMAN: Good morning. My name is Shane Gusman. Iím here representing the Amalgamated Transit Union and the Teamsters. I want to thank you for allowing us to present this request. Itís important to many of our members as well as other workers throughout the state, as well as the public in general. And I want to thank you for giving this request your full consideration.

Specifically, what we would like is for the Commission to take a look at the working conditions of commercial drivers who are employed by public agencies throughout the state and consider eliminating, both partially and very, very narrowly, an exemption for those drivers within the wage orders -- within one wage order. We believe that such action is necessitated by public safety and basic fairness.

Under the current law, under Wage Order 9, which deals with the transportation industry, public employees -- basically public transit drivers -- are exempt from most of the provisions of that wage order, including the provisions of meals and rest periods. And thatís the issue that we are focusing on. The commercial drivers that fall under this wage order that weíre talking about are mostly public transit drivers. However, there are some other commercial drivers, haulers of property, that also fall under the exemption.

The exemption basically means that thereís nothing in the law that requires a public employer to give even a minimal break to a commercial driver or a commercial driver employee during the workday. This is particularly problematic because drivers who are not -- these drivers are not entitled to daily overtime and are legally permitted and often required to work very, very long hours.

Contrast this with the private-sector commercial drivers doing the very same work. There are often transit agencies which contract with a private contractor like a Laidlaw or some other private contractor that provide the same services as public employees. Those folks are not exempt from the provisions of Wage Order 9. They are entitled to paid 10-minutes break after four hours of work and the normal lunch periods as required under the wage orders. In our view, thereís no justification for this differentiating between public employees and private employees doing the very same work.

There are three basic reasons why we think this wage order should be revisited and this exemption should be eliminated with respect only to meal periods and rest periods. The first issue is worker safety. As I stated before, commercial drivers are often required to work long hours. The bus drivers can be behind the wheel 10 hours a day and on duty 15 hours a day. The intrastate commercial drivers, haulers of property, can be on duty the same period, 15 hours, but they can be required to drive 12 hours a day and often are. This is a long time to be behind the wheel without a lunch break, without even a rest break or a chance to use the restroom.

The work that these employees do also requires particularly a lot of concentration. Youíre talking about vehicles that theyíre driving that are often 40 to 45 feet long, they weigh up to 80,000 pounds, theyíre very difficult to maneuver and difficult to stop. And so the drivers have to concentrate. And as all of you probably know who have been behind the wheel for long periods of time if youíve taken any trips, driving can be somewhat boring, and rest breaks can provide the drivers with a chance to rejuvenate and provide them with the ability to concentrate more on the second half or period of their workday.

Given the long hours and the nature of the job, itís no surprise that fatigue is the number one factor in accidents involving commercial drivers where they are at least partially at fault. In accidents where thereís a fatality and the commercial driver is partially at fault, it accounts for 40 percent of those accidents. Thatís a huge number when you compare it to other factors. In comparison -- just to give you an idea, in comparison, alcohol- and drug-related accidents, thatís only a -- alcohol and drugs are only a factor in less than one percent of the accidents where the commercial driver was at fault. So weíre talking about a huge difference. Fatigue is the number one factor. Itís a significant safety issues for our workers, and we think that justifies looking at this alone.

But you should also consider that itís a significant safety issue for the public in general. The public -- you all share the highways with these folks. Itís pretty important that they be well rested and able to drive in a manner that is safe for our highways.

You should also take into consideration that since these folks are often bus drivers, they carry the responsibility of the safety of the passengers of those buses, and who are oftentimes workers getting from place to place, from their job to home and vice versa. So this -- the existing exemption actually puts the worker at risk and the well-being of the passengers that these workers are responsible for in jeopardy.

And finally -- I touched on this earlier -- itís a matter of equity. The privately employed commercial drivers that perform the very same work, they get breaks and meal periods and have for years. And, you know, that has not broken the bank for the employers of these private commercial drivers. They make it work. The public agencies can make it work. In fact, some of them already provide these meals and rest periods on their own through collective bargaining and they find a way to make it work.

So as a matter of worker safety, public safety, and equity, we would ask that you take a look at this and ultimately eliminate this exemption, this narrow exemption. I think we could do that through if you convened a wage board to look into this, and we would ask that you do so.

Thank you.

COMMISSIONER DOMBROWSKI: Go ahead, Matt.

MR. McKINNON: Iíll be short and sweet. Iíve missed you all for the last year and a half or so here, but itís good to see you.

Youíve heard it all from Shane. Really, we believe that when somebodyís driving a bus or a commercial vehicle, the only thing that indicates -- thatís different is the signature on the bottom of the paycheck. They drive all day, whether theyíre private or public, and they shouldnít be treated differently. They shouldnít have a separate set of standards.

Clearly, our members need their breaks, need their lunch, and should get equal protection from state government regardless of who their employer is.

Thanks.

MR. JONES: Mr. Chairman and members, J. P. Jones, with the United Transportation Union. Our organization represents, among others, the drivers in the Los Angeles Metropolitan Transportation Authority, which is the largest single transit operator in California.

We support the proposal for a wage board to be appointed, by all of the testimony thatís preceded mine.

Iíd just like to make a couple of points specific to the transit industry. You have a situation here where a driver is required under the ADA regulations to call stops, to assist wheelchair and physically challenged people onto the bus, and to perform duties that a normal commercial driver of a truck would not be required to do, nor would an over-the-road be required to, a long-haul bus driver would be required to do. So I think thatís important in relation to appropriate rest and appropriate meal periods, rest periods and meal periods.

Another factor is that more and more, especially in the large urban areas, but everywhere, we see a situation where transit is hauling more and more school children. They are required, because of the various situations with the school boards across the state, to do more and more school pupil transportation. And thatís a factor in relation to safety that I think this board should consider in appointing a wage board to review this particular matter generally.

So itís a situation where many properties donít have required meal periods or required rest periods. And I think that it is appropriate for the panel to assign a wage board to look into this. And we strongly urge, for the reasons that have been previously stated and the ones that I just indicated, a special panel to review the peculiarities of this industry and with the exemption.

Thank you.

COMMISSIONER DOMBROWSKI: Any questions of these three witnesses?

COMMISSIONER ROSE: I have a --

COMMISSIONER DOMBROWSKI: Harold.

COMMISSIONER ROSE: If I may, the people that you represent do have contracts, though. Is that correct?

MR. GUSMAN: That is correct. That is correct.

COMMISSIONER ROSE: And are they enjoying something else within those contracts because of the exclusion?

MR. GUSMAN: I canít speak on every one of those contracts, that they may have bargained something else for those breaks. My understanding of the contracts that I know about are that thatís not the case. Theyíve gotten some limited form of breaks, but most of those -- most of the time, that occurs if thereís some time at the end of the -- end of the route, if thereís some time left over, which is rarely the case because of what Mr. Jones just explained. Then they get some form of break. But usually that -- because theyíre not required to provide any breaks under the law, thatís usually not sort of a give-and-take thing at the bargaining table.

COMMISSIONER ROSE: Thank you.

MR. JONES: If I could comment on that, of course, as you know, the collective bargaining environment works with that wages, hours, and working conditions of the particular individuals that are represented. While there has been discussion of that at the table, itís been an issue that has never been consummated, as far as our organization is concerned. Youíre right -- insofar as lunch periods are concerned, there are no requirements in the collective bargaining agreement because of the exclusion. Itís worked the other way from what your question was directed towards; itís working against us, not for us. Thereís been nothing in exchange except the -- I mean, just nothing.

The one thing that is there for rest periods is whatís called recovery time at the end of each route. I could use the example of a major property we represent in Los Angeles. Thereís a systemwide recovery requirement of 10 percent, systemwide, with a minimum of 6 minutes for each route. Now, the problem with that, of course, is that youíve got a situation where, if you get three wheelchairs, four physically challenged people en route, youíre down. Youíre down. The 6 minutes is eaten up. And they can take 10 percent systemwide, okay? So, therein lies the problem. Thereís no particular way to know.

I ride transit in Los Angeles. I donít like to drive an automobile. Even though I live in Sacramento, I spend a great deal of time in Los Angeles. I take the bus when Iím there because I donít like to drive. And I have seen a route go down as much as 20 minutes behind schedule because of wheelchairs and because of physically challenged or the elderly, who have to be assisted on and off the bus.

I think thatís an issue that a wage panel needs to look at in relation to transit, because even though there may be some language relative to the -- to the recovery time for breaks, you can never predict whatís going to happen in relation to that particular route that may have these transit-dependent individuals coming onto the bus.

So, actually, for us, itís working in the opposite direction.

COMMISSIONER ROSE: Thank you.

MR. McKINNON: I guess I would offer -- and I had a brief conversation with a Sacramento County supervisor about this subject the other night, after a game of basketball together -- but I -- there are both collective bargaining and non-collective-bargaining workers in both the private sector and the public sector. And essentially, by not having an equal, level playing field, what it means is that in the public sector, thereís a whole new bargaining issue thatís out there. And at minimum, that shouldnít happen. That shouldnít exist, because itís not -- I donít

-- we may have places in government that do discussion about whether to be private or public, but I donít think the IWC is that place. I mean, I think the IWC is the place where we protect workers that are doing their jobs. And I think they should have equal footing when -- when they go into collective bargaining, or if they donít have collective bargaining, with the private-sector workers.

Thanks.

COMMISSIONER COLEMAN: I have a question. I think itís for Shane.

What percentage of public employee -- what percentage of these commercial workers are covered by collective bargaining? Do you know?

MR. GUSMAN: I donít know what percentage of public transit workers are covered by collective bargaining. Maybe Mr. Jones can help on that question. You know, each of us have contracts at different public agencies. I think there are quite a few that are covered by collective bargaining, but I think there probably are a few that arenít. Maybe J. P. knows.

MR. JONES: Thereís 13 statuted transit districts in California, statuted by the Legislature. Okay. Those 13 -- and this has been a while since I looked at these figures, but I believe thereís 11 or 12, all but a couple, are not unionized --

COMMISSIONER COLEMAN: Okay.

MR. JONES: -- in one form or another.

COMMISSIONER COLEMAN: Okay. Itís my understanding -- and Iíll look to my colleague commissioners, or perhaps to Bridget -- is that in the statute generally, in AB 60, AB 60 exempts those under collective bargaining agreements from most of the requirements of the statute, really under the sort of logic that, as Harold brought up, that the agreement would negotiate these sorts of things. And so, again, that does

-- you know, thereís the equal footing argument, but that is in the statute.

MR. GUSMAN: Yeah. Regardless of that exemption, I think the IWC has independent authority under the Labor Code to look at exemptions and act on those. And even if collective bargaining agreements are exempt completely and you have no power to do that -- which I donít agree with -- there are folks out there that arenít covered by collective bargaining agreements, and theyíre not getting breaks and rest periods. And so they shouldnít be left out just because they arenít covered by a collective bargaining agreement.

COMMISSIONER COLEMAN: Thank you.

COMMISSIONER DOMBROWSKI: Any other questions for these speakers?

COMMISSIONER CREMINS: Real brief, and then maybe a motion.

Youíre contemplating also -- weíve talked a lot about transit drivers -- youíre contemplating also what Iíll call a freight or a truck driver working for a state agency or a city agency?

MR. BARTON: Good morning. Iím Douglas Barton. I appreciate the opportunity to speak to you, and I believe each of you have had an opportunity to see the letter that I submitted and that was distributed with your packets. I wonít simply regurgitate that for you. Iíve got a couple of others who are with me that are able to address some of the practical issues.

What Iíd like to make clear are just, I guess, several points that approach this from perhaps a different perspective than youíve had occasion to think about or youíve heard about from the previous speakers.

First, let me say that Iím able to tell you that Iím speaking for the entire California Transit Association, and they do adopt my letter as the position of the association, and there are a number of transit operators represented in the room here today.

If I understand history correctly, if you were to pursue what youíre being asked to pursue in this instance, it would be the first time that the IWC has entered the public sector. And whereas the statute is written broadly and certainly is susceptible to interpretation that the IWC is authorized, I would invite you to reflect upon why that hasnít happened up to now, and whether this is the occasion to enter into the public sector.

There were a number of issues that were referenced in the presentation of the advocates for the various unions, and a number of you asked questions that I think do hit upon some of these issues. I asked my colleagues when I got here this morning if any of them knew of any public transit entity in this state whose public transit drivers were not organized. We didnít know of one. So Iím not sure which ones they had in mind. Theyíre certainly not notable properties, and I do question where they are and who they are.

This is a highly unionized public occupation. It has some traditions in terms of what the goals and objectives are. It is typically represented by unions that are highly expert in transit. And by and large, the entities have very professional and well intentioned collective bargaining relationships.

Now, I have mentioned in my letter that I have substantial experience in this industry. And beyond the entities that I referenced, I have also been at the bargaining table for AC Transit and Santa Clara County Transit, and Iíve dealt with a number of very experienced transit people. And what strikes me about what is being proposed here is that it is so at odds with what happens at the bargaining table. As I listened to the previous speakers, I really had to wonder if they were detached from this process that they were attempting to speak about.

The issues that are being advanced, meal periods and rest periods, are simply not the kind of issue that has been described to you here. And so I think that you need to really think through, and I hope you will consider carefully, whether there is a need to break the long-standing precedent of entering into the public sector in this particular industry.

What I indicated in my letter is that what transit advocates, employee advocates, seek to advance is an ordering of their work as much as possible consistent with public needs. I mean, effective union advocates really are concerned about the service thatís provided, along with the employees that they represent. Management and labor, therefore, get together with that common goal. If the public doesnít find public transit useful, the public wonít use public transit, and then the goals of public transit are not served, the opportunity for public transit operators are not advanced.

There are a number of operating realities that -- excuse me -- that govern and constrain the way in which transit can be offered to the public. There are commute peaks, morning or afternoon, thereís the geography of a particular area -- Iíve alluded to some of those in my presentation to you.

You were told that itís rather common for transit operators to work very extended days, drive long hours, and as a consequence, operate with considerable fatigue behind the wheel, with a resulting risk to the public. Now, Iíd like to have you consider whether you think it would be appropriate for the local transit governing boards to be concerned about those very issues. Of course they are. Thereís a high degree of public accountability. Accident statistics for each district are not only widely available, theyíre reported regularly. At each of their public meetings, thereís the opportunity for anyone to address the board that wishes to. There are all sorts of community bodies that are set up to advise the public body as to how transit service can be made better, more accessible to physically challenged customers. But when all is said and done, thereís a public that needs to be served. The buses, if theyíre going to be useful to the public, have to be able to follow a particular schedule, be seen as reliable, be able to accommodate the physically challenged who want to get on a bus at a particular location.

Now, if you think about some of the examples that were raised by one of the previous speakers, that recovery time, which is built into each run -- and it is -- and itís in my letter -- itís for two purposes. One is to make sure that you donít get too far behind, and two, so that people can have some period of respite. Now, whatís been pointed out to you is that on some occasions, that period of respite may get chewed up because thereís going to be a delay, an unplanned-for delay, in a run.

Now, if there was a flat requirement that there be a prescribed rest break within a particular period of time on a run, and a prescribed meal period at a particular time on a run, and there is a mishap or an opportunity to serve, such as aiding a wheelchair person to get on the bus, or a detour, construction, accident, something that slows things down, how would that work out? I have never heard any experienced transit union advocate say that what should happen in those circumstances is that an operator should stop his or her bus in the middle of a run and sit back or get off of his or her bus and take a 10- or 15-minute break. No experienced transit union advocate would ever suggest that. And no experienced transit driver would ever want to do that. You can imagine what you would greet, returning to your bus after -- which is already running a little bit late because of all these other sorts of mishaps -- and say, "Iím coming to take my break; see you in 15 minutes." Nobody does that. Everybody whoís in this industry understands you canít do that. You have to serve the public. It is a public service.

Does that mean the people donít worry, management and union advocates alike, if runs are scheduled so tightly that thereís not opportunity to have those respites? Of course they do. So when those situations develop, if it looks like itís laid out too tightly or ridership builds up, those runs get adjusted to deal with that.

The major issue thatís advocated by experienced transit union advocates does have to do with how the work is laid out, not meal breaks. I mean, in all the years Iíve been dealing with this issue, Iíve never heard anybody complain about not being able to eat. The issue is the length of the run and how much unpaid time is there in the run. And the goal of transit union advocates is to reduce the amount of unpaid time in the run. That is why it is a recurring and standard transit union objective to have straight runs. And itís a very common provision to have -- AC Transit has it, Santa Clara County Transit has -- 60 percent of all runs must be straight.

Now, these are -- where those provisions exist, they were not originated by management. They were originated by transit union proposals, because they want straight runs where people are on the clock continuously. Itís not that they donít eat. They have occasion to eat.

Now, in my tender, early years, I asked that question of an experienced transit union advocate, and in a very avuncular tone, he explained to me, "Of course they eat; they eat when thereís a turnaround, when thereís -- they got their sandwiches and they patch it." And thatís what they do. Theyíd much rather do it that way and stay with the run, serve the public, and get off a bit earlier. Thatís why those straight runs are the most prized runs that the senior transit people bid for, as opposed to runs that have a longer spread time with a break in the middle, which the unions try to get compensated as much as possible.

I have never seen a transit governing board that is not highly sympathetic, understanding of, and concerned about the welfare of public transit drivers. They understand that that -- those are their ambassadors to the public. They want those people to be well -- to be courteous, to be able to deal with the public appropriately. And the way to do that is not to have them irritable and unnecessarily tired, but to have them motivated to serve the public.

What Iíd like to urge upon you is that this is really something you donít need to do. This is a thoroughly unionized public activity managed by public officials who are every bit as concerned about public safety and the health and safety of their employees are you are. And thatís not to minimize your concern, just to say that they have that concern and theyíre where the concern is. Theyíre the ones that hear about it if there are problems, and they want the problems to be dealt with.

This should be left to the public -- to the collective bargaining process to be dealt with as an issue of public accountability at the local level. It doesnít need to be regulated by the IWC. And ultimately, if it is, if you wind up extending this wage order, itís not going to change whether people get -- the amount of breaks people get, or the predictability of those breaks. What it will mean is that if you retain the idea that if they donít get a break within a particular period of time, there will be a pay penalty associated with that, itíll put another pay premium mandated through the state into these already premium-laden collective bargaining agreements, because what the unions have negotiated with management are a series of premiums that do affect how the drivers are ultimately compensated. There will be additional premiums that kick in if a run spreads over a certain amount of time. I donít know of any contract that doesnít provide for overtime after 8 hours, so I donít -- I really donít know what research has been done by those who have suggested that that is not a condition that prevails in transit. In fact, the pay conditions are typically much more demanding than that. Now, there may be a transit district somewhere that doesnít have it, but if they do, then they have done, as Commissioner Rose has indicated, theyíve negotiated an overall approach.

Think about all the other public occupations that have such a strong public service component. Firefighting, for example, which I understand Commissioner Rose is very experienced in, firefighters have a 24-hour schedule. Theyíre officially on duty for 8 of those hours, but theyíre subject to call for all the rest of the time. Now, how would you lay an IWC requirement upon that? Again, thereís a compelling service component that needs to be harmonized with the public officials responsible for that interacting with the union representatives to make sure that the employeesí interests are not overlooked. That should be -- that should be the mechanism for accommodating a variety of public interests which really do need to be accommodated if public transit is to serve its role.

MR. RALL: Good morning. My name is Durand Rall. Iím here representing the California Transit Association also. I serve as the chairman of their Operations Committee. That Association represents 82 public transit systems in the State of California, and I speak on behalf of them this morning. And I do have with me in the audience some of my colleagues, should there be questions that you have that I canít address.

Mr. Barton has covered several issues and covered them very well. I would just like to address a couple more of them. And that is that our board of directors and a lot of the boards of directors for our transit agencies are public elected officials. And so when they sit on our boards, they also sit on other boards, their own city councils, or their own county supervisors, and deal with wage issues with them as well, and theyíre very attuned to whatís going on in the marketplace with wage issues and with worker benefits and working conditions.

The issue of passengers and getting our passengers where they need to go when they need to be there is of prime concern to us as a public transit operator. We have set several goals within our agency as well as a lot of the other agencies have. One of our primary goals is that our service operates at a minimum of 95 percent on time. I have been the general manager of our system for a little over seven years, and we have never been below 94 percent, and a majority of the time we are above 95 percent. What that means is, on average, the time that is built into the run and scheduled for layover or recovery time or break time at the end does get met, because we are on time on our routes.

And we are not going to argue the point that occasionally employees do not get that break. There may be a train crossing, there may be an accident -- many things come up that will cause that bus to run late in its service, and that does impact the employee negatively. We do, however, authorize employees to take breaks if they have an emergency.

The on-time service in our system, as I mentioned, is 95 percent, and I think thatís fairly common in a lot of systems, to shoot for those type of goals.

Our safety record, the indication was that this makes -- creates an unsafe condition. Omni Transitís highest accident per million miles in the last seven years is 13.8 per million miles. Our last year was 9.8 accidents per one million miles operated, chargeable accidents under the National Safety Council. Our system has won the first place in the Los Angeles Chapter of that for ten out of the last thirteen years; the other three years, we were in the top three positions, both for our full-size buses as well as some of our service vehicles. So we do have a safety record thatís, I think, pretty outstanding.

In our system, we have 220 bid runs. 59 of those are 8-hour straight runs. These are the premium runs that are generally bid by the most senior operators. They want to get on the clock, do their service, off the clock, and done. The implication that people work or are there 12 hours or 13 hours, when there is a split run, their time may cover that, but in the intervening time between when they sign off of one run and on the other, which may be two or three hours, that time is theirs. They can go do something else. A lot of working mothers choose those split shifts because it allows them the opportunity to leave work, go pick up their child from school and make sure they get home safely, and then return to work in the afternoon. So it provides an opportunity for them to be -- to have a selection in runs as to meet their personal schedules.

Out of those 220 runs that we have, 86 of those are split runs that are under an hour. Generally, that does not afford that time, but it does certainly afford them the time to go into the drivers break room, go to the vending machines, have lunch, talk to their co-workers, maybe read a book for a while, watch a little TV -- those are all available to them. And those runs with the longer splits generally are the less desirable runs, except for those occasions where someone has a specific personal need and it fits their schedule.

There are breaks. The indication that there arenít any breaks -- there are scheduled breaks at the end of each run. We have committees that work with designing where restroom facilities are, when get buses get to there and when the times are so they can utilize those facilities. And these are also, many times, considerations or discussions during the collective bargaining process, about the amount of time we have and how we use it.

So I think those issues that were addressed by the previous speakers are, in a lot of cases, covered. There may very well be systems that operate differently, but in our association, of our systems we are representing, by public entities that are represented by bargaining unions, generally have those types of conditions available to their workers.

So I think you should take this from the hands from those persons who are closest to the operation, who work with the day-to-day -- who hear the complaints from our citizens who use the bus, and to put that into another arena for a decision outside of our local control that would dictate to us some new type of operating our systems would cause many negative impacts cost-wise. Weíd need different pieces of equipment, more pieces of equipment, relief drivers to relieve them, and a whole host of things that could add substantial costs to our system, which may or may not get passed along to those who ride the system, because, obviously, if you raise your fares to a certain point, you totally undermine the whole process of public transportation because people will no longer use it if itís too expensive. Theyíll find another way.

So, I thank you for the opportunity to listen to our comments and would be glad to answer questions.

COMMISSIONER DOMBROWSKI: Thank you.

MR. RAMACIER: Good morning. Iím Rick Ramacier. Iím the general manager of the Central Contra Costa Transit Authority, one of the Bay Area bus operators. Iím a member of the California Transit Association that Mr. Durand spoke of.

I just want to make a few comments about how this works right now on a real property with a very strong union. We have very -- we have three unions on our property: the Machinists are there representing our mechanics, Teamsters represent our transit supervisors, and the ATU represent our drivers. We have one of the more active, strong ATUís in the state. We just renegotiated our three-year contract. They had a number of concerns that we worked through. They did not specifically ask for lunch breaks in there. They wanted to discuss working conditions. They wanted to discuss the relationship of driving the bus versus being fit for duty and so forth. And we did tackle a number of issues.

We follow often what other operators do. We are not necessarily a leader. So when our union comes and asks for things, they are probably looking at the other local unions: "What did AC Transit give their drivers? What did the San Francisco MUNI give their drivers? We want these things out here." And so, I have to assume that when they come and ask for things and the trends weíre seeing at our local union, itís very similar across the state.

The things weíve done to address the issue that I think is at hand is making sure your drivers have the ability to use bathrooms, eat while theyíre on the job, and generally be driving under safe conditions, are a number of things.

We have a committee that has -- meets regularly to point out where are the clean, usable bathrooms. This is a very common problem. Public bathrooms are often dirty and unkempt in the Bay Area due to budget cuts by our cities. Private bathrooms, often the proprietor will not allow the bus driver to come in and use it. So we have to work at this. We have to sit down with the union and identify those bathrooms that are usable, and then turn around and write our schedules to accommodate the use of those bathrooms.

What youíve heard is correct: the senior drivers want these straights. They want to come in at 5 a.m., get on the bus, get out there, and be out by 1 or 2 in the afternoon. Though we do have these huge pieces of work that require a driver to essentially come to work at 5 a.m. and then come back to work in the afternoon, we pay a huge premium for those. We try to minimize those. Not only do the contracts require it -- and thatís the angle the ATUís in the Bay Area have taken to reduce those, those monster pieces of work -- but they cost us. And so thereís an incentive on both sides to reduce those. They donít want to necessarily work them, we donít necessarily want to pay the triple pay that we often are paying if we have people work excessive hours. So they get a lot of things in lieu of a formal lunch break per se that says, "Every four hours, you shall get a half an hour," or what have you.

We also provide a number of recreational things on our site for the operators, which we think are common, because, again, Contra Costa electeds are not going to lead the way in the Bay Area in what they give their employees. They are going to follow, as they have historically, what happens in San Francisco and Oakland. And we have a drivers room where you can watch television, cable television. Weíre talking -- we talked about pool tables. They have couches where they can sleep if they have two or three hours between their runs. They have food available. They have kitchen utensils to cook meals. They have -- they can make gourmet coffee, which is their latest craze, is to make the Peetís or the Starbucks coffee. They have been allowed to bring their children in and hang out for a while.

COMMISSIONER DOMBROWSKI: Do you have any job openings?

MR. RAMACIER: What?

COMMISSIONER DOMBROWSKI: Do you have any job openings?

(Laughter)

MR. RAMACIER: Yes, we do.

We -- the point is, we sit down with our union and we say, "What do you guys need to make the working conditions better?" And weíve been doing this for twenty years, as an agency.

Weíre very concerned that if the Commission starts to dive into the collective bargaining process, where does it stop? And decisions you might make as a result of doing that, you may not have the benefit to know the full externalities that might result, that -- why we have the contract that we have, and why our local ATU has asked for certain things and not for a formal lunch break.

My final comment, I would note, is that the three gentlemen that spoke on behalf of the unions are all from Sacramento. Thereís not a single local ATU official from the Bay Area or Los Angeles here today asking you to do this. This is not, in my view, a local union issue, but rather an issue out of Sacramento. And I think thatís a key distinction.

Thank you.

COMMISSIONER DOMBROWSKI: Any questions for these witnesses?

COMMISSIONER CREMINS: A question, or maybe a comment.

COMMISSIONER DOMBROWSKI: Sure.

COMMISSIONER CREMINS: You mentioned diving into the collective bargaining process. I wouldnít -- or maybe you wouldnít -- I donít think we would necessarily view that as a negative thing. My notion is when you collectively bargain, when you have another option to do, it provides both sides with some flexibility. And I donít think these folks are mandating that you use it or not, just to review the issue and give you some flexibility at the table. No? Would you agree or disagree?

MR. RAMACIER: My understanding is, is we have that flexibility now, and the unions have the flexibility to ask for whatever they want to ask for at the table. Theyíre not precluded from it. And most public entities, I would think, would want to at least explore it, if they can meet the request of their union harmoniously. And management relations to key to good bus service. Without them, you donít have good transit service. You simply cannot have good transit service unless you have good working relations with your employees. And if you donít have good service, then the public will not support it financially, much less ride the service.

I -- my sense of what is being asked of you today is that you step in and study whether or not you are going to tell us how to do it, versus giving us more flexibility.

MR. BARTON: If I might just comment upon that as well, I think that is the point. Collective bargaining is very well developed, and collective bargaining permits well informed people about the needs of that particular location to tailor the tradeoffs and the needs and arrive at an overall agreement that makes sense for them.

Your approach necessarily has to be categorical, imposing requirements upon everyone in an equal sort of way. And in many ways, thatís quite counter-productive. I mean, thatís why I think weíve all been trying to stress that it just seems to us remarkable that what is being proposed, and the reasons advanced for it, are so utterly contrary to what we so routinely hear at the bargaining table from those who are actively involved.

And a typical bargaining team for a union will consist of an international representative whoís very experienced in such matters, and then a bunch of people. And from that bargaining, so that those issues do get addressed, and they do get worked out. And there are necessary tradeoffs. And the employees in the service understand the service needs and where reasonable tradeoffs should be made. Sometimes that means that some runs will be less effective, and they have their seniority so that they can make choices, the more seniority they have. And that seems -- has always seemed to be a very fair trade.

And these people, I think, feel generally that their needs are heard and addressed locally. And thatís really where it ought to be.

COMMISSIONER CREMINS: But wouldnít you -- couldnít you envision -- you mentioned time constraints due to forced meal breaks -- couldnít you envision crafting some proposal or some agreement where, if you -- if time -- if you were 10 minutes behind schedule, 5 minutes behind schedule, that then they would not be allowed to use the meal break, or something like that? I mean, couldnít you envision some flexible proposal?

MR. BARTON: Well, sure. But, I mean, in

reality --

COMMISSIONER CREMINS: And shouldnít you have that at the bargaining table?

MR. BARTON: -- thatís -- that is -- that is --

COMMISSIONER CREMINS: Shouldnít they be able to use that there?

MR. BARTON: Well, I guess the question is, "Should they be able to propose it?" And, yeah. They have. In fact, one -- thereís one property, Golden Gate Bridge District, that does have provisions in its agreement for breaks and meal periods. It dates way back. I mean, it was -- it dates back twenty years. I donít know exactly who was involved in setting that up. And they can make that work, given the way that their service area is laid out, and that works for them. Thatís about the only place I know of that does have that.

If you -- if itís well understood that there is to be a recovery period any time, which is provide opportunity to catch up, and which will ordinarily leave some time for the operator to have some respite, thatís what people have thought they ought to have.

The further question is, do you want to try to build in even more time so that, if it does get scrunched up, that itís going to still be some opportunity for one of those to make a break? Well, that does build in more down time. That does build in more cost. And looking at the overall cost of operations, it ultimately results in compensation. How much compensation should one receive for that?

So, I mean, one point that I tried to stress here is that nothing you do will change the operating realities. What you do may result in another premium being imposed. And that seems to be not -- that doesnít deal with health and safety or anything like that. And the parties have had a way to -- have plenty of opportunity to provide for premiums to tax particular kinds of behavior, given the goals that they have in each local property. I think you should leave it there.

MR. RAMACIER: If I could just briefly add, there is another process the unions have available to them that the ATU especially has become very good at, and itís one we try to avoid, but itís their last resort, and thatís the grievance process. And letís take the example of -- letís say we have a run out there that has recovery time thatís this concept thatís been discussed of 10 minutes, and now the bus driver has gotten behind. In our system, they can call the dispatcher and say, "Hey, Iím behind, and I havenít had a bathroom break in two hours, and I know Iím behind, but Iím going to have to stop here and use the bathroom, so Iím going to do so." And if the dispatcher says, "No, I want you on schedule," then they can file a grievance. And usually, we will work with the union to make sure that doesnít happen again, because we donít want a grievance like that going to arbitration. We donít want an arbitrator to hear that we were so mean we wouldnít let the driver go to the bathroom when they were on record saying, "Youíd better let me go."

So weíve got those kinds of processes in place as well. And the unions have those things they can fall back on.

And again, if the transit operator is doing the right thing and running their agency in a way that avoids unnecessary legal fights and fights with their unions, they are going to sit down and work these things out before they go to arbitration. And they have those other avenues that the unions have today.

COMMISSIONER BOSCO: I have a question for Mr. Barton, because I guess all of you have experience with these negotiations, but you wrote the letter and you have years of it. Would I be correct that typically, meal periods and rest periods donít come up as an item in the discussions, but recovery times would, and recovery times subsume those issues?

MR. BARTON: Recovery time and then breaks in the run, because there is oftentimes a need to lay out service so that there will be a midday break, which is -- provides for more than a handsome meal. I mean, it can be a very extended period of time. So the goal for transit unions is to reduce the amount of unpaid time in a run. So there may still be a very substantial period in the middle of the day.

And then, with respect to recovery time, I mean, usually -- usually -- some contracts will provide for it, some donít. Everybody experienced in transit knows you have to have recovery time built into runs. Otherwise youíll just -- can be way behind and dissatisfy the public. And usually, thatíll mean that there will be occasions for driver respite, and sometimes -- sometimes not.

On the maintenance side -- the Machinists representative spoke to you -- itís utterly a non-issue there. In maintenance, they have a, you know, regularly scheduled shifts. And in some areas, they will have a meal period which is off-duty. Some places, theyíll have an on-duty meal period, if they want to get out and work a straight 8. And they will sometimes provide for rest periods, and sometimes not, depending upon, again, whether they want to have a longer workday or a short day. Usually their rest periods are written in because thatís a much more regularized, standard 8-hour day. There would be three 8-hour shifts each day because there would be a 24-hour maintenance obligation.

COMMISSIONER BOSCO: There was some testimony about, for instance, the more modern need for wheelchair access and whatever, and that if you have four or five people that need this help, you can get way behind. Are those the kind of things that come up? In other words, is this something that you bargain about in terms of expanding the recovery time?

MR. BARTON: Well, it comes up a lot at the bargaining table as to whether runs are too tightly scheduled. It comes up just as frequently in between collective bargaining sessions when those issues arise, because runs work -- runs typically get recut three or four times a year. They will make run adjustments and put them up for bid again. So, during the course of -- and the unions will get a copy of the run book before it gets put out for bid, so thereís an opportunity for discussion and there can be an opportunity for adjustments, and thereís some limited opportunity to adjust runs during the course of the sign-up. So it can come up there, it can come up at the collective bargaining table.

But, no -- I mean, people that --

COMMISSIONER BOSCO: When you say "could," does it come up?

MR. BARTON: Well, it does, but it comes up in a sort of -- in a somewhat different way. It comes up as people are talking about run structure issues. It doesnít come up saying, "I need more recovery time because I want to have a rest break." It comes up -- you know, "The runs are too tight and they need to be looser," or difficulties in terms of how runs are laid out, and usually, as Rick has referred to, with reference to where people can have an opportunity to go to a restroom. Restroom -- I mean, I have never been in a transit negotiation where the subject of where people could use the restroom didnít come up in collective bargaining, because thatís -- that is a big issue, for all of the reasons mentioned. And itís one that has to be given continuing attention because where a gas station used to be yesterday ceases to be, and now thereís a condominium there and they donít want people -- drivers to go in there and go to the toilet. So we have to find other places for people to use as previous opportunities cease to exist or are not as good.

So thatís an ongoing issue, one thatís not even addressed in your standard sorts of orders. But those get dealt with a lot. And because these are such long-standing relationships, they get dealt with a lot during the midterm of a contract.

COMMISSIONER BOSCO: Thank you.

COMMISSIONER DOMBROWSKI: Go ahead, Harold.

COMMISSIONER ROSE: If the exclusion goes away after a process is taken, the only thing that itís going to do for you is cost money. Is that correct?

MR. BARTON: Thatís right.

COMMISSIONER ROSE: Itís going to cost you more. A driverís still going to go to the bathroom when he goes to the bathroom. Heís still going to eat his lunch when he can.

MR. BARTON: Those other problems donít go away. We have to manage those in the same way we have. We have to work on recovery times and we have to look for bathrooms that kind of stuff. It just means that there would be an opportunity to lay on another premium. And we have to figure out how to adjust that, I suppose, at the bargaining table.

I mean, it would really be unfortunate, because the existing arrangements are not built upon those assumptions.

MR. RAMACIER: And I would also add that in the bargaining process, we as management then might seek ways to recover some of those damages by saying we may not -- we do things now in lieu of that. For example, the big thing at our agency is the a.m. straight. Thatís what the union calls it. Thatís a straight that begins in the a.m. and ends before three oíclock in the afternoon. And we have -- we have about 40 of those out of 170 pieces of work. And that actually costs us money, to create more of those. We have more of those than we actually need in terms of a service demand. We could actually cut the service up in a more cost-effective way, but because that has been such a strong interest of our union and we have a senior workforce, and I feel personally that if youíve been driving the bus for County Connection for 12 years and you got this, you ought to -- after 12 years, we ought to get you home by three oíclock in the afternoon if we can. Weíre willing to pay a little bit more for that, because it -- in the end, we think we get more out of it.

But if weíve got to break those up to accommodate forced lunch breaks, that may have a negative impact that our own drivers may not be aware would come down the pike if some sort of wage order were to come forward. So those are the sort of -- the fallouts, if you will, of trying in name the good to do something here, we might do something over here that people donít really want.

And thatís why -- my point is, these local unions, they understand this game really well, and they know exactly what theyíre bargaining for, oftentimes better than management does. Theyíre there. Their turnover rate is a lot lower than the management turnover rate at many of these properties. And they really -- theyíre really good at getting some of the things they really need to have to make it a good workplace.

COMMISSIONER DOMBROWSKI: Any other questions, comments? We have no other witnesses on this.

COMMISSIONER CREMINS: Is it proper to get some rebuttal?

COMMISSIONER DOMBROWSKI: If you request it, whatever you --

COMMISSIONER CREMINS: I request maybe some clarification on that. Not rebuttal, some clarification.

MR. RALL: Thank you.

MR. BARTON: Thank you very much.

COMMISSIONER DOMBROWSKI: Thank you.

MR. McKINNON: Iíd like to clear something up that was kind of put on the table there. Iím representing Machinists Union members who are transit drivers at this hearing. There was some mention of mechanics; I know mechanics are not in the wage order.

And I guess part and parcel of why somebody from Sacramento comes is that itís a big state. And, you know, just like he didnít know that we represent transit drivers, itís my job -- the taxpayers or a public transit district doesnít send our members from southern California up here to testify. Our members send me here.

So, first of all, thatís the first thing.

The second thing, nothing about what weíre requesting involves public safety, law enforcement, firefighting. It involves people that drive buses and other vehicles. Thatís what it involves.

And then I guess my final point is, whether or not Iím an experienced representative or not a representative or whatever, I donít think that the members of the Machinists Union elected the California Transit Association to represent or characterize their interest at this hearing. They didnít do that. They sent me. And for all -- all of that characterization, they would find it objectionable. You know, I didnít just dream up coming here. I heard from our members.

Finally, to the extent collective bargaining fixes these problems, on behalf of the Machinists, I am absolutely along the lines of the minimum wage; if you set a minimum wage and we negotiate different than that, thatís fine. And to the extent that itís been characterized that thereís these great bargaining relationships and all this problem-solving that happens in the grassroots of each transit district, thatís great. What weíre asking for here really got convoluted in that discussion.

What weíre asking for is something very simple and straightforward: that workers get treated the same in both private and public sector doing this work. To the extent thereís bargaining that goes on that makes arrangements that change that or alter that, thatís fine. Thatís fine. Thatís not a difficulty. But the bottom line ought to be the bottom line, just as you do with the minimum wage or anything else. You protect workers. From there, if we collective bargain differently, thatís fine.

COMMISSIONER DOMBROWSKI: Go ahead.

MR. RANKIN: Tom Rankin, California Labor Federation. I had a card in to speak on this previously, so Iím not exactly here in rebuttal, but Iím here to ask that you grant the petition to set up a wage board.

A lot of the discussion that went on here is discussion that should take place at a wage board, where Iím sure you would have probably a couple of union drivers there, and maybe -- I donít know -- I donít believe that anyone here is going to accept the fact that some of the folks who spoke from the union side arenít experienced transit union advocates, but Iím sure youíd have experienced transit union advocates at the wage board. And they will be able to sit down and try to discuss this issue.

But the basic premise is that public-sector workers should have the same rights as private-sector workers. Your duty under Labor Code 1173 is to look at the wages and working conditions of all employees in the State of California. Mr. Barton is incorrect -- youíve already done this for minimum wages covering public employees. This is not some bold new step. Youíre just continuing the tradition of extending coverage to everyone. And thatís a pretty basic principle.

The people in the private sector who run bus lines somehow or another, who do the same sort of work as the public-sector, somehow or another manage to live under the restrictions of Wage Order 9. Theyíre doing it, so I donít think itís an impossibility, as it was characterized by the folks on the other side.

And basically, we think that meal periods, rest periods should be considered just like minimum wage and health and safety requirements. They should be basic rights for everyone. And if a particular industry has to make some special accommodation, thatís what the wage board is for. And if they have to make more in collective bargaining, they can make it there. But itís certainly not an argument that the IWC should not deal with this issue.

MR. GUSMAN: Shane Gusman, on behalf of the ATU and Teamsters. We would share in the comments of Mr. McKinnon and Mr. Rankin.

The only thing that I would add is that the previous speaker mentioned one particular union that I represent, the ATU, over and over again. The ATU just had its -- Local 192 in Oakland, across the Bay here, just had itís 100th anniversary, where they convened a meeting of all of the local unions within California and other western states. And this issue was discussed. It wasnít cooked up in Sacramento. And the folks there, including vice presidents and international representatives who sit across the bargaining table, they thought this was a good idea. It wasnít our idea in Sacramento; they want this.

I think all of this discussion that occurred is good for debate, and itís a proper discussion for a wage board. And thatís all weíre asking you do, look at this issue. And we think, once itís looked at, youíll see that this exemption should be eliminated.

Quite frankly, I think the management representatives made a good point of why the wage board should be appointed. We think those individual incidences on individual properties, as to how itís been addressed and how the issue has been resolved, that is an issue and a time for a wage board to consider that. Letís get to the wage board and determine it.

Now, as far as something coming from Sacramento, Iíve been in this particular job for 26 years. Iíve negotiated agreements on five transit properties in this state. And I can tell you right now that as an organization, we donít want to negotiate at the bargaining table safety. We think that should be resolved by agencies like yourself or the Legislature. Do we want the collective bargaining process to begin to take care of every single issue relative to employee and worker safety? I donít think so. I donít think you want to go there. As an organization, we havenít done that. Itís a very slippery slope. Be very careful with that argument for management. Thatís why we have your agency, thatís why we have Cal OSHA, thatís why we have independent boards and panels that determine that. Thatís what a wage board will do.

We can get into this dialogue that weíve heard about, things that have worked somewhere else, in the wage board, or where it hasnít worked. But to say that simply because, you know, weíve dealt with this in a situation on a particular property, good -- there may not be a problem on certain properties.

One of those individuals indicated that they pretty much follow, on the smaller properties, what the large properties do. From the point of view of representing the drivers of the largest transit company of the state, there is where the majority of the problems begin, is in the large properties. And we agree that the smaller properties have the ability to maneuver and ability to resolve the problems, okay? Itís the larger properties, in my view, where the problem is.

But we can work around particular situations that have been agreed to or have been resolved locally before.

And insofar as no drivers, my individual members are concerned, we will guarantee weíll have individual drivers on the wage board. These people have to work. Weíre salaried representatives, full-time, with the union, just like these individuals that youíve just heard from, the management, are full-time. We have to pull people off line, off the job, to come here and testify. Thatís why, in relation to bringing our case to you for purposes of acquainting you, well, weíre here as representatives. And so the wage panel will be the one -- wage board will be the one where individuals will be heard. And we can flesh all of these particular individual nuances and these particular properties. We can frame a resolution to this situation.

So we ask that the wage board be appointed.

Thank you.

COMMISSIONER BOSCO: I have a question for Mr. Rankin, because I know youíre very conversant with these issues, and I think you carry around the Labor Code at all times.

If there was a private bus company that had a union contract, and that contract did not specifically provide for a meal period or a rest period, would that violate state law, or would that contract be valid?

MR. RANKIN: No. My reading of the law is they would have to provide the meal period and rest period. If they have nothing --

COMMISSIONER BOSCO: Even if the contract --

MR. RANKIN: Yes. If they have nothing in the contract, they would have to provide it.

COMMISSIONER BOSCO: Well, what if their contract specifically noted that they had discussed this --

MR. RANKIN: It doesnít matter.

COMMISSIONER BOSCO: -- and decided not to have a lunch period?

MR. RANKIN: It doesnít matter.

COMMISSIONER BOSCO: So a private company operating --

MR. RANKIN: Itís a base. Itís in the law. Itís a base. Itís like -- itís like every employer is required by law to provide a safe and healthful workplace. Every employer is required to pay at least $6.25 an hour.

COMMISSIONER BOSCO: But a meal period is something that canít be bargained away, in other words? Is that your belief, under AB 60?

MR. RANKIN: I think there may be flexibility in terms of on-duty meal periods. I donít think you can bargain a meal period away.

COMMISSIONER BOSCO: Is that -- Ms. Stricklin, is that --

MS. STRICKLIN: Iím not familiar with that. But if you would have me look into that --

COMMISSIONER BOSCO: I mean, I can --

MS. STRICKLIN: Excuse me. You have --

MR. RANKIN: Yeah. You know, there may be different provisions in different wage orders also --

MS. STRICKLIN: Right, right.

MR. RANKIN: -- in terms of these issues. I know there are, as a matter of fact.

MS. STRICKLIN: Right.

COMMISSIONER BOSCO: Well, Iím just trying to understand -- I mean, the comment was made that why should the public employees be treated differently than private employees, but I think the issue also is, does -- do the contracts over-arch this issue?

Because it seems to me thereís two big problems here. One is, this is clearly the camelís nose under the tent. If we get started on public employees, whether itís bus drivers or who it is, weíre going to end up with the firefighters and everybody else. Iím positive about that.

MS. STRICKLIN: Commissioner Bosco, one of the things you should consider is that under the Labor Code, the Commission has 120 days to make a decision about the petition, and after that 120 days can decide to call a wage board or not, or deny the petition. So thatís one of the things that can be investigated in the meantime, if thatís what you want --

COMMISSIONER BOSCO: So, actually, thatís sort of what I was going to get to -- and thank you -- I didnít realize 120.

But I think thereís two big issues: one, the question of do we want to get into the province of public employees, who generally are governed by elected officials that are responsible to the various electorates, whether itís transit or other areas; and then, secondly, do we want to, in effect, augment contracts, union contracts. That -- apparently, this industry is very heavily unionized, so weíre not dealing with one that isnít.

On the other hand, it seems to me that we might want to look at a couple of the things that have been discussed. One is safety. Is safety a legitimate issue here? Thereís some evidence that it may be, and other evidence that was presented that it isnít. And then, secondly, is this something that typically is not bargained for, or there may be a disparity in the bargaining position?

I would like to propose that we not jump into a wage board right now, because I donít have any illusions as to what a wage board is going to do. I mean, we generally know how wage boards are comprised. And, you know, I mean, maybe theyíd come up with something reasonable, but I can guess pretty much that weíd be back in six months with pretty much the same set of circumstances that we have here.

But I would like to suggest that we have our staff investigate at least two things: one, public safety and whether it is affected by this issue; and, two, the bargaining situation and whether this is fairly bargained for, or, if it isnít, whether it might be appropriate, then, for us to step in and, in effect, over-arch the bargaining process.

Thatís just my thoughts on it.

COMMISSIONER DOMBROWSKI: Tim?

COMMISSIONER CREMINS: A comment. Iím not sure, number one, if weíve got the staff to do that. I think weíre fairly short-handed now. Weíre down to one staff person, one and a half staff persons?

MS. BANE: We have two, that are very able staff

-- and youíre right, weíre quite short-staffed.

COMMISSIONER BOSCO: Well, canít we call the department --

COMMISSIONER CREMINS: But I think the -- and I think what youíre addressing is a function of a wage board. And Iím not sure the characterization of itís a destined outcome, and I think itís -- I think weíre charged to have a fairly balanced board of labor and management to kind of hash out the issue. I think thatís kind of the purpose of the board.

And on the issue of collective bargaining agreements, I think -- I may be wrong, but on the last issue -- and I think it was 16, dealing with the construction industry -- they had exemptions in that wage -- in that charge -- or the order -- excuse me -- that allows exemptions for collectively bargained situations, where if the collective bargaining agreement addresses the issue of meal breaks, they can do away with it, but it has to be bargained and dealt with, labor and management, to see if they can come up with a better compromise. And I think thatís -- was kind of my point beforehand, driving to some flexibility at the bargaining table. And I know the construction wage charge allows you to do that.

And I think -- I think you can deal with that -- my point is also, you can deal with that in a wage board, in a convened wage board.

COMMISSIONER BOSCO: Could I ask if we can call on the Department to do this type of a study if we wanted to?

MS. BANE: Well, I really do believe that the purpose of the provision that gives you 120 days is to allow us to accommodate your request for an investigation. And we would certainly accommodate your request, with counsel and staff, and other staff if we need to.

COMMISSIONER DOMBROWSKI: Maybe Iíll make a suggestion that we put this item on the agenda for the next meeting again, that we ask both sides to think about the questions that were asked, that staff follow through on Commissioner Boscoís suggestion and we try to sort it out.

COMMISSIONER CREMINS: If thatís the direction, I hope we -- is there some we can help get extra staff maybe? And I donít know whether itís informal help through the state budget process or something, if we --

MS. BANE: Well, we appreciate the offer to get help. How about if I say weíll certainly get back to you on that?

COMMISSIONER CREMINS: But let me state Iím fearful of doing away -- setting some precedent here of not using whatís mandated statute, is wage boards.

COMMISSIONER DOMBROWSKI: Iím assuming both sides are going to communicate directly with Bridget and help her address those issues. Is that a safe assumption, I hope?

Harold?

COMMISSIONER ROSE: I would also like to see that some research be done about that -- I believe it was the October meeting, because we did discuss exemptions at that time, and I would like to have that researched.

MS. BANE: Um-hmm.

COMMISSIONER DOMBROWSKI: Okay.

MS. BANE: And I believe that you said, Commissioner Rose, at that meeting that your recollection is open --

COMMISSIONER ROSE: I thought they were already excluded. I believe it is open, in the statute.

COMMISSIONER DOMBROWSKI: And your memory was what?

COMMISSIONER ROSE: My memory is that the exclusions were already taken away.

COMMISSIONER DOMBROWSKI: Okay.

COMMISSIONER CREMINS: Iím not sure where youíre going, Harold.

COMMISSIONER ROSE: We had a list of exclusions.

COMMISSIONER CREMINS: Okay.

COMMISSIONER ROSE: And it was a long list. And the only ones that werenít taken away was student nurses and -- there was only two or three that were left, to the best of my knowledge.

COMMISSIONER DOMBROWSKI: Well, that should be easy enough to investigate. Did we -- is that -- my proposal, is that satisfactory? Or anything else anybody wants?

Okay. Letís do that.

Next, Item 3, staff report on Wage Order 14. I believe thereís some issues thatís been raised by the sheepherder ranchers. Iíd like Jasper Hempel to come forward and articulate those, and then I would -- I would like counsel to be able to outline what she proposes we can do, various options.

Jasper?

MR. HEMPEL: Thank you, Mr. Chairman. Members of the Commission, Iím Jasper Hempel, with Kahn, Soares, and Conway. I represent the Western Range Association, who have been the representatives of the sheepherding industry, the ranchers in California, as weíve gone through the program -- as weíve gone through the IWC process.

Before the April 24th hearing, the IWC published a wage order, and in that wage order it had a variety of things, including a definition of H-2A worker, which said that H-2A -- the provisions of H-2A, of the Federal Immigration and Nationality Act, commonly referred to as the H-2A program, "or any successor provision," was the language that you had before you on April -- on the April 24th hearing. Following the April 24th hearing, the IWC published a new version of the order, which included the wages, the penalties, but also included a new definition of H-2A worker, which said H-2A means "in effect as of the effective date of this order," which is July 1, 2001.

That change was made without any input from anyone. There was no public discussion, there was no opportunity for us to be heard, there was no motion by any commissioner, there was no vote on making that change.

That change is substantive. Itís substantive because the definition refers back to the penalty provisions, specifically Section 18(B), that says that if you use a sheepherder in violation of the definition of sheepherder, then you are subject to the penalty provisions of the new wage order.

In addition, the definition also ties to meals and -- meals and lodging. And so, for example, if the H-2A program is amended in the future to include better housing

-- excuse me -- better -- yeah, excuse me -- housing or meal benefits, we wouldnít be able to use those in California because we are locked into a definition in effect as of the date of July 1, 2001.

So, in our opinion, these are substantive changes which require the input of the Commission before the change could be made.

I have to note that Iíve spoken to your staff, and your staff has been extremely responsive and have been very helpful and probably, moreover, patient with me as weíve gone through this process.

But it is significant, and itís significant because, as we articulated through the many hearings that you sat through, this industry is an industry in decline. And even something like this is going to further exacerbate the problem.

Let me give you some examples. January 1 of 2001, there were 325 sheepherders in California. Today, or actually June 13th, there are 266. Thatís a decline of 59 sheepherders. Thatís a 20 percent reduction. Between June 1 and June 13th of this year, 10 sheepherders lost their jobs because the producers felt that they couldnít afford and couldnít comply with the new wage order.

In addition, we are aware of four companies that have joint operations in California and either Idaho, Arizona, or Nevada. Those four companies have moved their entire sheep operations back to those other states. Whatís the effect of that? Now those sheepherders, who were getting $900 a month here, are now getting $700 or less in those other states.

I know it wasnít your policy, I know it wasnít your intent, to create this kind of a problem, but thatís the reality of whatís occurring.

Making this change, even this little change on the definition, will exacerbate the problem even further.

So, on equitable grounds, no opportunity to be heard, no opportunity to express our concerns about the change in definition, we respectfully request that the definition be moved back to the definition that was in place before April 24th.

Thank you.

COMMISSIONER DOMBROWSKI: Marguerite?

MS. STRICKLIN: First of all, Iíve reviewed the transcripts of both the April 9th and the April 24th hearing. At the April 9th hearing, there was discussion on both sides of this issue as to what the definition should be and whether or not the sheepherder definition should be tied to the H-2A program. There were comments from I donít know how many, but at least a couple of commissioners, that they did not want to be tied to the federal program.

Also, with regard to the effect of it, what would happen if the H-2A program conditions were decreased, wages or whatever? State law would still prevail, and so that there would be no effect of those H-2A programs in California.

In the past when the IWC has acted on using federal regulations in statutes, what it has done is tied it to the statute or regulation thatís in effect at the time of the effective date of the IWC order. This is exactly what they did with the definitions of administrative, executive, and professional employees. And I believe thatís the reason why the change was made.

The effect of going back and changing that now -- and Iím not sure what the Commissionís intent was at the time it was voting -- I donít know if they recognized that that was -- the language was the same as for any future provisions, we did try to clarify a couple of things at the April 24th hearing that were confusing, and I think we just neglected to bring that to your attention.

The effect of not -- of changing the language back would be that there would be no publication of this order within 60 days of the effective day. The order was published with the new language in it. If there was no publication, the order cannot go into effect on July 1st. It would have to go into effect January 1st.

The provisions of the minimum wage section would have to be changed because there cannot be a change in the wage as of July 1st if thereís no regulation thatís in effect.

One of the other requirements of the effective date of July 1st are that the IWC can vote there has been publication of the order. If it was your intent to have the language as it is now in the published order, you can vote that there has been publication, and then the order can go forward as of July 1st. If not, we would have to go through that whole process again.

COMMISSIONER DOMBROWSKI: It was my intent that we were adopting the language that Jasper has articulated. That was the language we had on the table, and that was what I thought was going to be published. So Iím concerned -- I donít understand the legal implications of the Commission adopting a definition that was noticed, and then that definition being changed in the drafting stage. I donít -- I donít understand how we can do that.

And we did -- we adopted language. The language tied it to the H-2 -- what is it? -- the H-2 --

COMMISSIONER ROSE: H-2A.

COMMISSIONER DOMBROWSKI: -- H-2A program. Thatís what we adopted.

MS. STRICKLIN: Was that everybodyís intent?

COMMISSIONER DOMBROWSKI: Thatís what we -- we adopted -- well, when we went through -- Iíll give my viewpoint. When we went through, we did the -- what I will call the ranchersí working conditions and definition, and then we put in the salary or the wage amendment. Thatís what we adopted.

COMMISSIONER ROSE: I think there was a concern about the H-2A program, that if the federal government raises the minimum wage higher than what we proposed, then that would have to go in.

COMMISSIONER DOMBROWSKI: It would -- it would go in, yeah, because theyíre tied to the federal H-2A.

COMMISSIONER ROSE: But we had a tie there, that if they got something better than --

COMMISSIONER DOMBROWSKI: It would have to go up, right. But it also, from the industryís perspective, gave them a consistent definition, as opposed to us providing a California definition. And I -- thatís where I was coming from.

Tim?

MS. BANE: Mr. Dombrowski, I think that what you are describing is correct. If it was your intent that that language be adopted, that you expected that language to be in the wage order and to be published, I think that at this point, because it has been changed, that the Commission is in a position where it has to consider its options now, because the wage order has been published with a definition which apparently is contrary to that definition which you, and perhaps the rest of the commissioners, intended.

If it was not the commissionersí intention, or if today it is not their intention and they would vote to ratify the publication, that is an option. Otherwise, there will be a delay in the effective date of Wage Order 14.

COMMISSIONER DOMBROWSKI: I -- but I donít -- I donít think itís -- the question for me isnít what is expedient for the IWC. The question is, I mean, what we did. And what we did was adopt that definition.

Well, itís nobodyís fault that -- I mean, I think it was -- no one was -- this was an unintentional editing error. I donít -- I donít think there was anyone who had any misintentions or anything like that. But we are where we are. And if that means we have to republish and delay the effective date, I donít see any way around it.

COMMISSIONER CREMINS: I think that -- as you know, there was great confusion, certainly on my part --

COMMISSIONER DOMBROWSKI: Right.

COMMISSIONER CREMINS: -- at the last meeting about this. I think, though, that if we -- are you saying that if we make this change today, weíre going to delay implementation of the order till next January?

MS. BANE: Yes.

COMMISSIONER DOMBROWSKI: Because of -- because of the notification requirements.

MS. BANE: Under 1184, Section 1184, the effective date of an order or regulation will be effective on the first day of January or July, and not less than 60 days from the date of publication. And that publication has to be in newspapers that are specified also in the code under another section.

COMMISSIONER CREMINS: To oversimplify it, I guess the problem is, is that youíre fearful that if the feds make a change, it will not correspond to the state.

MR. HEMPEL: Thatís exactly correct.

COMMISSIONER CREMINS: And is there a problem now?

MR. HEMPEL: Pardon me?

COMMISSIONER CREMINS: Is there a problem now? Are they corresponding?

MR. HEMPEL: There is no problem now, no.

COMMISSIONER CREMINS: Because I -- then, if thatís the case, if thereís both corresponding now, I would hate to delay implementation of increases to the workers, though.

COMMISSIONER DOMBROWSKI: But in the future, thatís going to have to be changed pretty quickly.

COMMISSIONER CREMINS: I would hate to see -- I would hate to see a delay in increases to workers -- I think, which we all intended is to give some type of increase -- just for a potential problem that isnít there yet. Iím fearful of that.

MR. HEMPEL: Well, itís a real problem.

COMMISSIONER CREMINS: And is there -- is there some expedited way to get around the six months, if a problem comes up?

MS. BANE: Thereís no expedited way that I know of. I would suggest to you, however, that if there is a change in H-2A that is favorable, and the Commission wished to adopt it and a petition was presented, they could certainly do that at a future date.

COMMISSIONER DOMBROWSKI: Would that mean -- would that mean ongoing wage boards on sheepherders?

COMMISSIONER BOSCO: I think we should ask the Legislature to just set up an IWC for this issue alone.

COMMISSIONER CREMINS: I would just -- I would just -- I think, in my mind at least, I think the notion of an increase over-rides -- we all intended for some type of increase -- I think overrides a potential problem that isnít there yet.

COMMISSIONER BOSCO: Could I ask -- I donít know if I understand this issue. As I understand it -- and Iím probably wrong -- but there is a definition of what a sheepherder is. And we voted on that. And as I understand it, we voted that a sheepherder is a person as defined by the federal program, or as that program changes -- or as that definition changes in the future.

MS. STRICKLIN: That was part of the definition. The definition also includes specific tasks and then, in addition, also the H-2A definition at present, or any successor provisions of H-2A.

COMMISSIONER BOSCO: And the issue now is that instead of it allowing for a change in the federal law in the definition, we now just said itís what it was on the day we passed it.

COMMISSIONER DOMBROWSKI: And what was published, right.

COMMISSIONER BOSCO: So to -- so there would be a -- quite a substantive difference there, because if the federal definition changes of we passed, then our enactment would automatically change accordingly.

MS. STRICKLIN: Um-hmm.

COMMISSIONER BOSCO: So it isnít really just a technical change; itís a substantive change.

COMMISSIONER DOMBROWSKI: Yeah.

COMMISSIONER BOSCO: Okay. Thank you.

COMMISSIONER DOMBROWSKI: Mr. Rankin or Mr. Schacht?

MR. RANKIN: Yeah. Tom Rankin, California Labor Federation.

A couple points. First of all, this issue is not noticed for discussion at this meeting. All that was noticed was a report from the staff on something or another regarding the wage order. So I think it would be totally inappropriate for you to take any action thatís substantive in nature.

In terms of the issue --

COMMISSIONER DOMBROWSKI: Wait. Before you leave that, Tom -- Marguerite, is that accurate, what he just said?

MS. STRICKLIN: The Government Code requires, in terms of a notice, that there just be a brief description of what the item is on the agenda. This is a report about Wage Order 14. Part of the report included that we had received a letter from Mr. Hempel.

Now, if you wanted to act on that letter from Mr. Hempel, I think that thatís fairly within the discussion, you know, the report on Wage Order 14.

MR. RANKIN: Well, I mean, in terms of public notice, no one knew about this, including, I understand, your staff, until today. I certainly didnít know about it, and neither did the primary advocate for the sheepherders. So what kind of notice is that?

The other thing is, itís very important to us that this wage go into effect July 1st. Youíre not going to sit here and deny the most exploited workers in the state a measly increase in their minimum wage for six months, I would hope.

If this is a problem, you can deal with it later. Thereís no conflict right now between what youíve done and whatís in the federal regulation. There is no --

COMMISSIONER DOMBROWSKI: How do we deal with it later?

MR. RANKIN: There is no immediate effect.

COMMISSIONER DOMBROWSKI: How do we deal with it later?

MR. RANKIN: How do you deal with it later? You

-- probably youíd have to set up another wage board to deal with it later. But you sure canít deal with it at this meeting.

COMMISSIONER CREMINS: At the risk of splitting hairs, Marguerite, on our agenda, we have "consideration" for the transit drivers and -- "consideration of a wage board." The noticed agenda item is a report. Is there -- at the risk of splitting hairs here, is there, in your mind, a difference between "consideration" and a report? "Consideration," in my mind, is consideration of some action by the board, as opposed to a staff report is just a report and not an action by the board.

MS. STRICKLIN: Well, in the past, a report has included, for example, a report by staff that there has been a publication of the orders and then a vote by the Commission that, yes, in fact, there has been publication. So thatís an act by the Commission.

COMMISSIONER CREMINS: Which led to approval by -- approval or minutes or --

MS. STRICKLIN: Pardon me?

COMMISSIONER CREMINS: Which led -- a report led to maybe an approval of minutes or a report, some action by the board?

MS. STRICKLIN: Approval of the staffís action.

COMMISSIONER DOMBROWSKI: But are -- go ahead, Harold.

COMMISSIONER ROSE: Yeah. I, in good conscience, agree. I donít think that I could ask the sheepherders to wait another six months for this. I just donít think we could do that.

MR. SCHACHT: Mr. Chairman, can I be heard for just a second?

COMMISSIONER DOMBROWSKI: Sure.

MR. SCHACHT: Mark Schacht, representing the Sheepherders Union.

On the substantive issue that Mr. Hempel raises, the concern that higher standards might somehow come into effect at the federal level and that this language would lock in essentially lower standards, thatís not my understanding of how the H-2A program works. This -- your regulation has absolutely no effect on -- with respect to those federal standards for an H-2A grower. That H-2A grower will have to meet the highest of both the federal and the state standards. So if there were a higher standard put into effect to participate in the H-2A program, youíd have to meet the state standards that apply and youíd have to meet the federal standards that apply.

So if there is a concern that higher standards would somehow be barred from implementation by this language, I donít think that concern is well founded.

Secondly, I think the issue of a subsequent wage board to consider a technical change, substantive change in this definition is something that we would participate in, expedite, but we think thereís really no basis for believing that between now and the time that that wage board would conclude that thereís going to be a substantive change in federal --

COMMISSIONER DOMBROWSKI: Do you -- let me -- do you disagree, then, with the definition Jasper is proposing? Do you have any problem with that?

MR. SCHACHT: Yes. And we raised throughout the hearing the possibility -- the inadvisability of linking the state definition of a sheepherder to this moving-target federal definition.

COMMISSIONER DOMBROWSKI: I think weíre -- I think we could sit here and keep fighting over this, but the fact is, we took a vote on specific language. Now, if we do what youíre proposing, then I think he turns around and sues us on the same grounds. I mean, weíre stuck between a rock and a hard place here because of an error.

MR. HEMPEL: I have a suggestion, Mr. Chairman. And I donít know if thereís any legal effect to this at all -- and Ms. Stricklin can advise us. But if you look at Paragraph 18 of the wage order -- excuse me -- Paragraph 19 -- it talks about separability. It says:

"If the application of any provision of this order, or any section, subsection, subdivision

. . . should be held invalid or unconstitutional or unauthorized or prohibited by statute, the remaining provisions thereof shall remain in effect."

I would argue that what the Commission did or didnít do was an unauthorized action. And as I read that "Separability" clause, it would allow you to change the definition back to what it was before April 24th and leave the wage and everything else intact.

Do you read it the same way, Ms. Stricklin?

MS. STRICKLIN: I think so.

I would still -- I have a question, though, about the publication that went out. There still would have to be a new publication of the change back to the language that was voted on.

COMMISSIONER DOMBROWSKI: Thatís only a problem if someone wants to make it a problem, though, isnít it? If we -- if we change the language to what we intended to vote on and we authorize and take a vote that this goes into effect July 1st with the wage increases, then thatís some unknown party, I guess, who might want to challenge us. But I donít -- if all the parties are sitting here and saying they agree to that, then I think everybodyís happy. If they donít, they donít.

MR. RANKIN: All the parties are not sitting here, obviously. I donít know how many ranchers there are who arenít sitting here. And I doubt that anything Mr.

Hempel --

COMMISSIONER DOMBROWSKI: Letís say the representatives --

MR. RANKIN: -- says can bind any of those folks.

So what I would suggest you do -- can bind them, I said -- I doubt that very much. You canít legally do it, at any rate; they have standing on their own.

But what I would suggest you do is you go ahead, and then, if youíre going to make a change -- and I donít know what the truth is in terms of what you think you enacted --

COMMISSIONER DOMBROWSKI: Tom, we already went through the definition. We argued about that for months. We had a vote, we decided it.

MR. RANKIN: I said I donít know what the truth is about that. But if youíre going to change it, then you should wait until after -- you should let the publication stand and change it later, because what youíre doing has no practical effect --

COMMISSIONER DOMBROWSKI: But the publication doesnít reflect what we voted.

MR. RANKIN: Well, then the severability clause that heís talking about will deal with any problem you might have until you do it right.

COMMISSIONER BOSCO: But thatí doesnít make sense, because you canít separate out the definition. The whole thing would be rendered meaningless if -- first of all, a separability clause typically doesnít apply to this situation. It applies when a court overturns a part of it or some part is determined by the judicial branch to be invalid by some other provision.

Secondly, how could we possibly sever the definition of what a sheepherder is? I mean, then weíd end up with this absolutely meaningless enactment.

MR. SCHACHT: Commissioner, just on that point, we basically regard, at this point, the addition of that language referencing the H-2A program as surplussage because the preceding definition is taken from the H-2A program. So what you have basically right now is a definition that spells out all of the -- all of the activities that a sheepherder performs, taken from the H-2A clearance order.

COMMISSIONER DOMBROWSKI: But we consciously -- weíre looking at if that changed, our definition would change. We understand that. We understand -- we understand that thereís no problem today. But we were looking at five years from now, ten years from now, not forcing some future IWC to have to continue to visit the issue of sheepherder definition. Thatís what we decided.

MR. SCHACHT: Right. Iím not commenting on that

-- and I -- and Iím -- well, not commenting on that. But --

COMMISSIONER DOMBROWSKI: What else is there to comment on? Thatís what weíre talking about.

MR. SCHACHT: Okay. Well, I think there is an issue whether or not, in terms of the H-2A program and its requirements on participants, whether the language is substantively different between the two, the version that was put forth by the IWC and this version.

COMMISSIONER DOMBROWSKI: I think a majority of the commissioners have already said in their opinion it is. And thatís why we adopted the language we adopted.

Marguerite, how do we fix this?

COMMISSIONER COLEMAN: What are the options?

MS. STRICKLIN: I can give you your options. One is that you decide that the publication was incorrect in that it did not include the language that was voted upon, and there would have to be a republication.

COMMISSIONER DOMBROWSKI: Do we need to vote on that right now, or do we just tell you that thatís the majorityís opinion? How do we do that?

COMMISSIONER CREMINS: Shall we finish the options? Shall we finish the options first?

MS. STRICKLIN: Yeah.

COMMISSIONER DOMBROWSKI: Okay.

MS. STRICKLIN: The second thing that you can do is to ratify the language that has been published by taking a vote today that there has been proper publication. The order will then go into effect as of July 1st with the language as it is.

Third, youíve had various statements from your panel there as to what you could do. Iím not sure about the severability, but that would -- by just crossing out the language there and leaving the language of the actual duties that are entailed, whether that would work. But as I understand what has --

COMMISSIONER DOMBROWSKI: Let me -- let me narrow this down. Okay. What do we have to do to authorize staff to renotify -- renotice with the proper language so that weíve dotted the "iís" and crossed the "tís," to move this thing? And I understand by doing that, weíre pushing it back to January 1st. How does that scenario play out?

MS. STRICKLIN: Any act would have to be -- there would have to be a vote to do that.

COMMISSIONER DOMBROWSKI: Okay. Iím making a motion that we authorize staff to republish the notice with the proper language that was adopted.

Do I have to have anything else in that?

COMMISSIONER CREMINS: Can I ask a question --

MS. STRICKLIN: You have to --

COMMISSIONER CREMINS: -- on the motion?

COMMISSIONER DOMBROWSKI: We can have discussion.

COMMISSIONER CREMINS: Is there a way to craft some scenario where they will obtain their current increase and we make a change --

COMMISSIONER DOMBROWSKI: Iím open -- if thereís a way to do it, Iím open to that.

COMMISSIONER CREMINS: Is there any way to do that, Marguerite?

I think, certainly, the will of the Commission was to give some increase.

COMMISSIONER DOMBROWSKI: Absolutely. No, absolutely. If thereís a way to do that, I am more than willing to accept it.

COMMISSIONER CREMINS: I think thatís an overriding concern. Is there a way to craft something and cure the problem?

MR. SCHACHT: Thereís one other issue, Mr. Chairman.

If you put the -- if you put the effective date off to January 1st, youíll have to change the minimum wage increase provisions, which are triggered July 1st --

MS. STRICKLIN: Thatís correct.

MR. SCHACHT: -- of each of the two successive years.

So the effect of doing this -- or of doing this will be to deny workers half of the increase.

COMMISSIONER DOMBROWSKI: Before you go there -- Marguerite, is there a way to do the wage increase July 1st, like we had?

COMMISSIONER CREMINS: Is there a way to delay the vote for a week until you can investigate the issue, without reconvening?

COMMISSIONER DOMBROWSKI: I donít think so.

MS. STRICKLIN: Without reconvening, I donít think so.

COMMISSIONER CREMINS: Can we reconvene over the phone?

MS. STRICKLIN: If --

COMMISSIONER CREMINS: It has to be publicly noticed?

COMMISSIONER DOMBROWSKI: Itís a public meeting. We canít --

COMMISSIONER BOSCO: Is there any way to determine that this was an inadvertent technical mistake in the publishing, and therefore shouldnít delay the implementation of it?

MS. STRICKLIN: You could -- you could argue that that -- that there would be an amended publication, but I donít know what effect that has, and I would think that might be subject to challenge.

COMMISSIONER BOSCO: Well --

COMMISSIONER DOMBROWSKI: Would you challenge that?

MR. HEMPEL: This issue is so critical for us --

COMMISSIONER DOMBROWSKI: But let me -- let me -- I mean --

MR. HEMPEL: What we would like is a solution that takes us -- the very solution you asked for, which was to take us back to the language that was in effect --

COMMISSIONER DOMBROWSKI: Which Iím proposing --

MR. HEMPEL: -- and then --

COMMISSIONER DOMBROWSKI: -- and would also -- but also, Iím asking you, if we donít -- if we could just vote on this -- I guess Iím saying weíre voting on the language, not -- weíre voting that the error was insignificant and that the wage order is going to include the language we voted on. Okay?

MS. STRICKLIN: Okay.

COMMISSIONER DOMBROWSKI: And it also -- that means weíre also voting on today that the way -- I mean, everything is adopted, this is done, put to bed, July 1st is the raise.

MR. HEMPEL: I cannot represent to you that we wouldnít challenge it.

COMMISSIONER DOMBROWSKI: Okay.

MR. HEMPEL: This is an industry thatís in such rapid decline, and even something like this will exacerbate -- just in the last few months, itís gone down 20 percent.

COMMISSIONER DOMBROWSKI: Okay. Well, Jasper, Iím going to just -- Iím going to make the motion I just articulated.

Marguerite, I am of the opinion that the error in the publication was inadvertent, not significant enough to delay, that the commissioners will once again reaffirm by this vote that they were adopting the language that we discussed, with -- tying it to the H-2A program, and that that this, as a consequence, can then be effective and the sheepherders get their increase and the sheepherder owners get their definition.

COMMISSIONER BOSCO: Could I maybe reword that a little different? Would you mind? I mean --

COMMISSIONER DOMBROWSKI: Iím open to suggestions.

COMMISSIONER BOSCO: I think that, you know, thereís a likelihood at least that, unless weíre not real careful here, we could invite litigation.

But Iím going to move that we adopt the publication, adopt the order as published, with the technical exception that the wording that we originally voted on be inserted into the order as a technical change that was inadvertently included in this publication.

COMMISSIONER DOMBROWSKI: Okay?

MS. STRICKLIN: So that would mean, then, by the time -- this also has to be published in the Notice of Registry -- that the language published in the Notice of Registry would go back to what was the language that you all agreed you had voted on.

COMMISSIONER DOMBROWSKI: Correct.

COMMISSIONER COLEMAN: And that would mean the increase would happen July 1.

COMMISSIONER DOMBROWSKI: Okay. Iíll second that motion.

Any discussion on that?

COMMISSIONER CREMINS: A clarification.

COMMISSIONER DOMBROWSKI: Please. Nothingís clear on this one.

(Laughter)

COMMISSIONER BOSCO: Donít push it too hard.

COMMISSIONER CREMINS: We are -- youíre going to change the language to correspond, should there be any future changes, with the federal definition?

COMMISSIONER DOMBROWSKI: Correct.

COMMISSIONER CREMINS: And along with that, grant the increase effective July 1st.

COMMISSIONER DOMBROWSKI: Correct.

COMMISSIONER CREMINS: And youíre not sure whether youíre going to litigate or not, regardless of this?

MR. HEMPEL: No, I didnít -- I didnít understand it like that.

COMMISSIONER CREMINS: But you understand it now?

MR. HEMPEL: Yeah. Now I understand the difference, and Iím -- Iím happy to go back to the client and suggest to them that this is okay.

COMMISSIONER CREMINS: I assume the other sideís going to be unhappy?

COMMISSIONER BOSCO: Well, theyíre unhappy because they lost that argument a long time ago. But theyíre not unhappy otherwise, I would think, because we are implementing this immediately. And weíre just simply deciding that this was a technical error and should not, in an of itself, warrant overturning what the majority on the Commission wanted to do.

COMMISSIONER CREMINS: Iím clear on the issue.

COMMISSIONER DOMBROWSKI: Okay. So we have a motion. I believe I seconded it. If I didnít, I second it.

Can we call the roll?

MS. BANE: Commissioner Bosco.

COMMISSIONER BOSCO: Aye.

MS. BANE: Commissioner Coleman.

COMMISSIONER COLEMAN: Aye.

MS. BANE: Commissioner Cremins.

COMMISSIONER CREMINS: No.

MS. BANE: Commissioner Dombrowski.

COMMISSIONER DOMBROWSKI: Aye.

MS. BANE: Commissioner Rose.

COMMISSIONER ROSE: Yes.

MS. BANE: Four-one. The motion carries.

COMMISSIONER DOMBROWSKI: Okay. Now do we need to -- do we need to do any other votes?

MS. BANE: Yes.

COMMISSIONER DOMBROWSKI: Okay.

MS. BANE: There are a few other things embodied in the report that -- one, that the staff wishes to report that we are in consultation with John McCloud, who is the chief of the OSHA Standards Board, and that there is no overlapping of jurisdiction in the wage order that has been passed -- proposed to pass by the Commission; two, that a Statement of the Basis -- a copy of the Statement of the Basis, along with the order, will be published in the California Regulatory Notice Registry as required in Section 1177 of the Labor Code and will appear on July the 2nd; lastly, that a wage order -- Wage Order 14 has been published as required under 1182.1 and has been the subject of a vote that the Commission has just taken to ratify that.

And also, I would ask that the Commission consider -- that the Commission vote on the fact that they concur with regard to the fact that there will be publication of the order as proposed and passed in the Notice of Registry on July 2nd.

So Iíd ask for a motion.

MS. STRICKLIN: I might add that there -- I think thatís the correct date, but whatever the next date after July 1st is, is what the -- whatís required.

COMMISSIONER DOMBROWSKI: Okay. Can I get a motion?

COMMISSIONER BOSCO: So moved.

COMMISSIONER DOMBROWSKI: So moved. Second?

COMMISSIONER CREMINS: Second.

MS. BANE: Commissioner Bosco.

COMMISSIONER BOSCO: Aye.

MS. BANE: Commissioner Coleman.

COMMISSIONER COLEMAN: Aye.

MS. BANE: Commissioner Cremins.

COMMISSIONER CREMINS: Aye.

MS. BANE: Commissioner Dombrowski.

COMMISSIONER DOMBROWSKI: Aye.

MS. BANE: Commissioner Rose.

COMMISSIONER ROSE: Aye.

MS. BANE: Five-one. There is a concurrence as to the --

COMMISSIONER ROSE: Five-one?

COMMISSIONER DOMBROWSKI: Five-zero.

MS. BANE: Five-zero. I just increased your number, another fiat by the staff.

(Laughter)

COMMISSIONER BOSCO: Whoís the poor person?

MS. BANE: I havenít picked him out yet.

Thank you.

That concludes our report, the staff report on Wage Order 14.

I would refer to counsel to see if thereís any addition that she would wish to make.

MS. STRICKLIN: The Statement to the Basis for Order 14 weíll have for your review, and the last thing would be to have you concur in the statement at the next meeting.

COMMISSIONER DOMBROWSKI: Okay.

Item 4, status of wage board for Wage Order 5.

MS. BANE: The staff will report regarding the status of the wage board. There is a wage board report that has been included, which contains the summary of the discussion at the first wage board meeting, which was held on May the 31st in Sacramento. At that meeting, the wage board decided and voted to meet again on July the 18th, 2001, as they authorized to do. And they have not concluded their deliberations, and they have no recommendations to the Commission at this time.

And as far as the status report of the wage board, that concludes the status report. However, there is an issue in that there have been letters received from members of the public who have asked the Commission to expand the scope of this wage board. However, if the chair wants to entertain that now, I think the chair could --

COMMISSIONER DOMBROWSKI: No, no.

MS. BANE: -- or if itís not going to be brought up, or if it is going to be brought, it could be heard under New Business.

COMMISSIONER DOMBROWSKI: I donít -- I donít want to bring that up. In fact, I thought we had agreed that we were going to keep that focused to what the SEIU --

COMMISSIONER ROSE: Thatís correct.

COMMISSIONER DOMBROWSKI: -- and the others. I donít think thereís sentiment for that on this Commission to open that. So --

MS. BANE: Well, I think itís clear that the wage -- the charge to the wage board, as it stands, would not permit any expansion.

COMMISSIONER DOMBROWSKI: Okay.

COMMISSIONER CREMINS: I think theyíre waiting for a budget to issue.

COMMISSIONER DOMBROWSKI: Okay.

All right. Weíre going to go to Item 5, any new business. I have Ann OíRegan.

MS. OíREGAN: Good afternoon, commissioners. My name is Ann OíRegan, and I represent New United Motor Manufacturing, Inc. Iím here today on behalf of NUMMI as well as the UAW. We submitted a joint letter several weeks ago requesting that a wage board be convened to make a modification to Section 11(A) of Wage Order 1. Specifically, we want to modify the language to add a sentence that reads as follows:

"In the case of employees covered by a valid collective bargaining agreement, the parties to the collective bargaining agreement may agree to a meal period that commences after no more than six hours of work."

That request is pursuant to Section 512(e) of the Labor Code, which allows for the IWC to allow for meal periods to go up to six hours if itís in the interests of the employees.

We believe that in situations in which you have a collectively bargained agreement in which both the union and management agree to extend the meal period to that period of time, there wonít be any problems for the employees and it would serve the interests of all parties.

COMMISSIONER BOSCO: Didnít we just discuss this?

COMMISSIONER DOMBROWSKI: Canít they do that already?

MS. BANE: The issue was --

MS. STRICKLIN: Thatís -- no, go ahead.

MS. BANE: I think the issue was raised by some of our -- one of our speakers that they were under the impression that meals and rest periods could not be bargained.

COMMISSIONER DOMBROWSKI: Oh, thatís right. Okay.

MS. BANE: And I think thatís one of the things you asked us to explore.

MS. STRICKLIN: To investigate.

COMMISSIONER DOMBROWSKI: Right, okay. Well, letís -- letís defer action on your item until we hear from staff on that issue, then. I guess thatís the way to answer it.

MS. BANE: Do you have any light to shed on that for us?

MS. OíREGAN: Well, my understanding is that youíre -- I understand that thereís some legislation thatís addressing Section 514, which might address the -- allowing collective bargaining agreements to be exempt from the provisions of Section 512. But Iím speaking solely to the wage order, and the wage order does not in itself appear to exclude employers with collective bargaining agreements from the provisions of Section 11 that addresses meal periods. So thatís -- thatís why Iím here, is to deal with that specific provision of the wage --

COMMISSIONER DOMBROWSKI: But I think thereís a problem with the specific statute language in AB 60 on meal periods.

MS. OíREGAN: Right. Thatís Section 512 and 514.

COMMISSIONER DOMBROWSKI: Right, right.

MS. STRICKLIN: Thatís right.

MS. OíREGAN: And I donít even want to go there. I just wanted to focus on the --

COMMISSIONER DOMBROWSKI: All right.

MS. OíREGAN: -- wage order itself, independent of that legislation.

MS. STRICKLIN: There -- I donít know whether that would fall under an exemption that the Commission could look under, under 515(b). Thatís --

MS. OíREGAN: 512(b).

MS. STRICKLIN: No, there are other exemptions that the IWC could look into, under 515 and under 512. But thatís -- yeah, Iím not sure if that falls into that category, but -- because there is that statutory problem with 512. so --

MS. OíREGAN: Well, we had been exempted from the meal period provisions of the wage order, independent of --

MS. STRICKLIN: Independent of that, yeah.

MS. OíREGAN: -- of all this, up until October, apparently, of 2000, at which time apparently the IWC had made the determination that collective bargaining agreements -- took out any exemptions that you could have from --

MS. STRICKLIN: Right.

MS. OíREGAN: -- meal period provisions. So thatís why weíre here, is now that we donít -- we no longer enjoy the ability to be able to request the exemption, we want the wage order to clarify that a collective bargaining agreement can provide for a longer meal period.

MS. STRICKLIN: Well, thatís -- we can look into it.

COMMISSIONER DOMBROWSKI: Okay. Well, weíll direct staff to look into your issue, and at the next -- again, at next monthís meeting, weíll have a brief report of what are our options on that.

MR. SIMMONS: Good afternoon, commissioners. My name is Richard Simmons, from the law firm of Sheppard, Mullin, Richter, and Hampton in Los Angeles.

I appreciate the opportunity to have the ability to address you this afternoon with respect to an opinion letter that was issued by the chief counsel of the Division of Labor Standards Enforcement on May 30th of this year. In that opinion letter, the DLSEís chief counsel wrote to me and announced to the State of California a fairly dramatic and, I think, significant change with respect to the salary requirements of California law.

Iím actually in a unique position to address this, I guess, initially, because the letter was directed to me, even though I did not seek it. And interestingly, I believe that I was the last person in America to actually see it, because it had been posted on the DLSEís Web site and I actually received indirectly from other lawyers who had the privilege of receiving it first. And I ask only that my bar results and law school transcripts not be communicated to people in quite the same way.

(Laughter)

MR. SIMMONS: In any event, it is out there, and itís something that we in the general public, we in the wage and hour field who practice in the area, organized labor and management alike, must deal with.

Now, I would like to preface my remarks by stating that I have a profound respect for the author of the opinion. I think Mr. Locker is an extremely intelligent individual who has the best of intentions. Notwithstanding that fact, I believe that this opinion of the chief counsel is entirely flawed, both in its logic and in its analysis. It is unfair to workers, it is unfair to employers, and it is inappropriate from a policy consideration perspective.

I would also submit at the outset that this opinion letter widens the gap between federal law and state law in a manner that was never contemplated by the Legislature or by this Commission. It takes advantage of the perceived silence of the IWC with respect to the issue of what salaried means, and it views that perceived silence as an invitation for the enforcement agency to construe the law in this area.

With that said, I will divide my remarks into three areas.

First, Iíd like to address the seriousness of the problems that this opinion creates. We have been accused in the employer community of overreacting to this letter, but I submit to you no one is overreacting. You cannot trivialize the significance of this opinion. Number two, I would like to address the flaws in the analysis set forth within the letter. And number three, Iíd like to identify some ways by which this Commission can rectify the problems that the opinion creates.

First of all, the seriousness of the problems. The magnitude of the problems in this area cannot be overstated. In fact, while the DLSE has suggested that the employer community is overreacting, I believe the opposite is true.

In fact, the problem can be illustrated just by looking at what employers have to look forward to, along with their workers, on July 4th. On July 4th, a number of companies will close temporarily in recognition of the 4th of July. Many companies would wish to close, not only on July 4th, but to provide employees the benefit of a longer period of time off, and thus would give them the option to be off on July 5th and 6th as well.

When it comes to nonexempt employees, thatís no problem. The Labor Commission agrees that nonexempt employees can be allowed to take July 5th and 6th off and utilize their vacation pay. No consequence whatsoever would befall the employees or the employer in that case.

On the other hand, many employers would also like to provide the same approach with respect to exempt employees. But the Labor Commission has announced now that cannot be done. You canít allow people, let alone require people, to take the 5th and 6th of July off and require them to use their vacation pay, because that would be deemed a temporary business closure within the meaning of this new opinion, and it says that employers cannot require employees to use their vacation at times when a business is closed. It would simply be impermissible based on the rationale of that letter.

Now, that is entirely incompatible with the way state law had been enforced in the past and with the way federal law has been enforced, both in and outside of California. The suggestion, by the way, that itís violative of the California vacation pay rules ignores the fact that the principal cases in this area all involve California employers, including the case cited in -- one of the cases cited in the opinion, Abshire v. County of Kern, which is a California employer within the State of California, where the Ninth Circuit definitively construed this area.

So, many employers feel that they are stressed by financial circumstances, and they have options. One of the options is to lay people off. If you lay people off, thereís no question that the obligation to continue salary is at an end, in fact, even if itís a temporary layoff. On the other hand, if you approach this by trying to allow people to use their vacation during one of these temporary business closures, the exemption is forfeited according to this new opinion of the Labor Commission. So the exemption is lost.

To trivialize the significance of that is, I think, terribly myopic and it would be a tragedy. In fact, if you look at the opinion and read it at face value, it construes AB 60, I believe, erroneously, and thus would be effective on January 1st, 2000, which means every employer that was unaware that the DLSE was going to issue an opinion on May 30th, 2001, some eighteen months, about, after AB 60 took effect, every employer that had a temporary closure in the year 2000, even over the 4th of July, may have lost already its exemptions.

And the question is, well, do you just lose the exemption for those people who were asked to use their vacation? And the answer to that is no. It appears that the exemption would be lost for everyone in the company. Literally, everyone would become nonexempt.

And some would say, "Well, Richard, thatís a bit hyperbolic, isnít it?" Well, if you take a look at the cases that have construed the salary requirements over the years, they say if a person is subject to an impermissible deduction, even if the deduction did not, in fact, occur, if there is a realistic possibility that they would have been vulnerable to an impermissible deduction, then their exemption is lost. So an argument could be made that the exemption has been lost for every person in a company that has a temporary business closure where vacation must be used to cover the pay for those days off. That would be tragic.

And we need not go very far to identify legal authority for that proposition, by the way, because the U.S. Supreme Court has established that standard in a case called Auer v. Robbins.

Now, I understand that the DLSE has suggested to some that the exemption might be lost only for one month. That is not what the opinion says. The exemption says -- excuse me -- the opinion says the exemption will be lost. It does not say for one month, nor does the law support the contention that it would be lost for a month. That means it would be lost forever, and perhaps for all employees. You cannot trivialize or diminish the significance of this opinion if you look at it carefully.

Now, you have to couple that with the reality that in California, there have been more than 175 class action lawsuits filed in the wage and hour area since January 1st, 2000. Our firm tracks these cases because we are involved in much of this litigation. Over 175 class action lawsuits. The legal fees associated with the defense of these cases can drive people, some employers, particularly relatively small employers, into bankruptcy, let alone the liability. It is not fair to say that this is not a real problem. It is not realistic to assume that the plaintiffsí lawyers in these cases will not amend those lawsuits to add a claim that the exemptions have been lost because of technical violations of the salary rules as construed by the DLSE.

I have identified twelve serious problem areas resulting from this opinion. I can recite them briefly. I can engage in a dialogue with respect to any of them, but let me just highlight them for the record.

First of all, business closures, including those that may result from temporary blackouts in the energy crisis may create enormous havoc with respect to the exemption rules.

Vacation pay and the inability to use vacation pay as many employers set up and openly announce those policies to exist, couple that with the fact that many employers have gone to paid time off programs, which are more attractive to employees than normal vacation programs because they can use PTO or paid time off benefits for vacation or illness without saying that theyíre ill or without identifying what the reason is. Well, the Labor Commissionís policy places those paid time off benefits, which are very attractive to employees, in jeopardy because employers would be more prudent to transition back to vacation rather than paid time off programs.

Those are the first five that are obvious, based on the DLSEís interpretation. Add to that subtle issues that are not obvious to everybody.

Number six, family leaves. The DLSE opinion is dramatically inconsistent with the California Family Rights Act and the federal Family and Medical Leave Act. Its interpretations are fundamentally at odds with these state and federal statutes.

It is inconsistent with Labor Code Section 230.8, which is the California Family-School Partnership Act, that specifically says employers can require employees to use vacation and paid time off for time that they spend at schools to participate in school activities. Yet the Labor Commission policy does not address or permit this.

Itís inconsistent, number eight, with the leave of absence policies under Labor Code Sections 1025 through 1028 for drug and alcohol rehabilitation.

Number nine, itís incompatible with the reduced leave provisions of federal regulations that allow employees who need medical leaves to work a reduced schedule. For example, rather than work 40 hours a week, I can work 30 hours a week under federal law if my doctor says so. Federal law explicitly allows an adjustment in the salary to reflect the adjustment in the hours that are made as an accommodation to the employee. The Labor Commissionís policy does not allow that.

Itís inconsistent with the California Pregnancy Disability Leave Law, Government Code Section 12945.2, which expressly allows the use of vacation during pregnancy disability leaves.

Number eleven, itís incompatible with the federal rules on suspensions.

And number twelve, it poses very serious problems, yet subtle problems, with respect to sick leave.

Now, when you take a look at the magnitude of the problem, it is not just an exemption issue. Certainly that is the biggest and the most obvious of the issues. Mainly you lose the exempt status and thus would be vulnerable to overtime liability. It also creates enormous exposure with respect to the meal and rest period penalty issues that were created by the Commission last year as of October 1, 2000, because all these people who have been treated exempt erroneously, according to the Labor Commission opinion, would be nonexempt and thus there would have been an obligation retroactively to have provided meal and rest periods that are not applicable to exempt employees. And because of the inability to demonstrate their compliance with the meal and rest period rules has been -- has occurred, there would be meal and rest period penalties. And what is the hourly rate for the penalty provision for a person erroneously treated as exempt? Weíre talking substantial exposure here. Weíre talking significant issues.

It is impossible in good faith to trivialize these issues. Thatís my first point.

My second point deals with the flaws. Now, I could spend more time than Iím sure youíre willing to provide me to identify the various flaws that exist with the opinion. We could go line by line to address the flaws. But I believe we can devote our attention to just a couple of points with respect to the opinion.

It is predicated on its face on what is perceived by the DLSE as the silence of this Commission on the subject. It is based in two different portions of the opinion on what the DLSE views to be the failure of the IWC to hint to any interpretation that would be inconsistent with the DLSEís interpretation.

Yet the central basis of this opinion is, I think, flawed for the following reason. We all know that the word "monthly" is not new to the wage orders. The Labor Commission contends that unlike federal law which interprets the salary requirements to mean a weekly salary, state law is interpreted to mean monthly salary, as though something new has occurred as a result of AB 60 with respect to the term "monthly." In fact, that is not the case. For decades, for more than fifty years, the wage orders have used the concept of monthly remuneration in California. The word "monthly" is absolutely not new. The term "monthly" predated 1974 and 1976, when the IWC attempted to expand the wage orders to cover adult males. It has been there for over fifty years, monthly remuneration.

Whatís new under AB 60 is not the word "monthly," but rather the word "salary." They have substituted the term "monthly remuneration" with the term "monthly salary." It is the word "salary" thatís new. The addition of the word "salary" instead of "remuneration" does not give us license to reinterpret the term "monthly," which has always been there.

Now, if we take a look at that fact, the word "monthly" has been there for decades and decades, we should take a look at what existed before AB 60 and what the Legislature meant when, in AB 60, it utilized the term "salary." AB 60, as we all know, was signed on July 20th, 1999. Well, what preceded that? In April of 1997, April 28th, 1997, to be precise, the former chief counsel of the DLSE, Tom Cadell, wrote an opinion letter to me where the DLSE first announced what it meant by the term "monthly remuneration." Ironically, I was involved then, as I am now, although I did seek that opinion letter, while I did not request this one.

On April 28th, 1997, Tom Cadell wrote a substantial opinion letter to me which I have furnished to the IWC staff. And in that letter, the DLSE opined what "monthly remuneration" meant. And in that letter, it specifically said the term "monthly remuneration" would be construed under California law in a manner that is compatible with the term "monthly" -- excuse me -- "weekly salary" under federal law. In fact, quoting from this April 28th, 1997, opinion of the DLSE at Page 2, the DLSE said:

"The remuneration requirement of the various orders is met when, under the employment agreement, the worker receives each week a pre-determined sum constituting all or part of his compensation, which predetermined amount is not less than the remuneration required by the specific order the employee is subject to, multiplied by 12 and divided by 52. Such weekly sum shall not be subject to reduction because of variations in the quality of the work performed."

Expressly adopting the weekly interpretation in federal law.

And then the DLSE, in what I thought to be a well reasoned portion of this opinion, at Page 5 expressly noted that it was consistent with the best interests of the workers of California to interpret it this way. It did not in any way diminish the rights or interests of the workers.

At Page 5 of this opinion, the DLSE wrote:

"Adopting the approach used by the Department of Labor would allow the remuneration provision to have a logical meaning which is consistent with the federal rules and which will allow the vast majority of employers to meet the requirements of both laws in this one area. Also, this can be accomplished without diminishing the rights of workers in this area. The DLSE does not feel that requiring the computation of the monthly remuneration required by the IWC on a weekly basis would do any injustice to the position taken by the IWC."

And it goes on.

So, in April of 1997, the chief counsel of the DLSE definitively construed the concept of monthly remuneration to be identical in most respects to the concept of weekly salary that existed under California law. It then republished this concept in its 1998 Operations and Procedures Manual. At Sections 36.3.3 through 36.3.3.5, it identified the very same concept, republished it in 1998, and expressly cross-referenced and incorporated by reference the April 28th, 1997, opinion that the chief counsel had written to me.

This was as widely publicized as any policy of the Labor Commission with respect to the enforcement of the salary requirements of state law. There was no question in anyoneís mind how the Labor Commission viewed the salary rules to apply. They applied in a manner that was consistent with the weekly standards applied under federal law.

And the Legislature was clearly aware of that when it adopted AB 60, as was the IWC. In fact, if you look at the provisions of AB 60 that bear upon this issue, they support the contention that the Legislature did not want to disturb the weekly salary standards that the DLSE had applied despite the monthly remuneration language in the wage orders.

The DLSE published this interpretation widely. The Legislature and the IWC presumably knew of it when they acted on AB 60, which I believe, as I said, reconfirmed the DLSEís policy.

Letís take a look at specific language in AB 60. Labor Code Section 515(c) specifically defines full-time employment based on a weekly standard because the weekly standard is the cornerstone of the wage and hour administration format in California as it is under federal law and the laws of other states. 515(c) makes this clear.

But we need not stop our analysis there. Labor Code Section 515(d) specifically establishes that the standard to compute the regular rate for salaried employees who are nonexempt is a weekly standard. So salaried nonexempt employees have an overtime rate that is computed by dividing their salary by 40 hours in a week. The weekly standard was expressly adopted.

Overtime in California is always computed on a workweek basis, not a monthly basis, but a workweek basis. That too reaffirms the principle.

And Labor Code Section 204, and the other payday provisions in Sections 201 through 210, are all compatible with a weekly payroll system in California, and they further support this view.

In short, the workweek has historically been used as the basis for computing overtime pay in California, for determining whether someone is exempt or nonexempt, and for computing the overtime rate for someone who is mistakenly treated as exempt.

In fact, the irony -- one of the ironies in the DLSE opinion is that if you applied the salary basis on a monthly basis and someone were found nonexempt, you would then have to resort to Labor Code Section 515(d) and compute the overtime rate for that person on a weekly basis. It would be internally inconsistent and, frankly, nonsensical.

The DLSE noted that its prior interpretation of a weekly salary basis would not diminish the rights of workers. This is the agency that is charged with the responsibility to enforce the law. Clearly they gave great attention to that issue before making that public statement.

So Iíve identified what I perceive to be some of the flaws with this opinion. There are more. I would not want at one point to be accused of not having wrung out the towel there, but I think weíve identified enough for purposes of this proceeding.

Let me suggest to the IWC a potential remedy.

By the way, I did leave out one thing that I shouldnít, SB 88. SB 88, as we all know, was legislation signed by the governor on September 6th, 2000, as urgency legislation. That reaffirmed the very same principles of using a weekly basis to compute overtime with a salaried employee who is nonexempt.

How do we rectify this problem? Frankly, I think itís quite easy for the Commission to rectify the problem. And a way to do that is to eliminate its silence on this issue. The DLSE, as I noted earlier, perceived the silence of the IWC as an invitation to construe this law in a new and different way. I believe that the IWCís silence on this issue was based on a perception that it had no obligation to give attention to the issue beyond that which it did because the term had already been definitively construed in this well publicized policy of the Labor Commission back in 1997 that was republished in its Operations and Procedures Manual, which not only summarized it, but also republished the very letter that had been written to me on April 28th, 1998 (sic), a letter that most practitioners in this area on both sides of the table are very, very familiar with. So the IWC had no compulsion to address the issue specifically because there was no reason to think that it was a problem.

I believe AB 60, as noted earlier, ratified this concept of a weekly salary in the definition of Section 515, and I believe it was reaffirmed yet again with SB 88. So I do not think there was a need, at least one that we perceived, for the IWC to have addressed this issue before. However, I think there is now.

I think itís consistent with the payday provisions of California law, the various Labor Code and Government Code provisions that Iíve talked about already with respect to family leave, pregnancy leave, the California Family Rights Act, the federal Family Medical Leave Act, to use a weekly standard. In fact, we donít even know what the term "month" means as articulated in the DLSE letter. Is it a calendar month? Is it an employeeís anniversary month? Is it any month that the employer gets to establish? And does the month vary in duration depending on whether or not weíre using February or July? Because if you get to prorate if somebody misses a day during the month, are we going to prorate in different amounts if somebody misses a day in February when there are fewer days than if somebody misses a day of work in July? It is illogical. You do not want to tie yourself to an illogical premise, that which is embodied within this opinion.

I believe and I request that the IWC correct the problem by taking this opportunity to clarify its intent. I do not believe that this requires you to adopt a new rule. I do not believe this requires a new rule. I believe that this simply requires a clarification of your intent to follow the federal standards on the weekly salary rules, together with the opinions of the U.S. Department of Labor and the Ninth Circuit Court of Appeals that have construed those standards and the exceptions to those standards under federal law.

Again, most of the major cases in this area have involved California employers. To suggest, as the DLSEís letter does, that a different rule should apply under California law than under the FLSA ignores the fact that most of the employers who were involved in those cases were, in fact, California employers.

The IWC has two choices before it, as I see it. You can either ratify what the DLSE did in its policy, or you can repudiate it. A simple clarification can repudiate it and set the record straight before it creates disaster. And it would be terrific if some pronouncement could be issued even before July 4th so that employees can enjoy the benefit of the holiday without this cloud of legal uncertainty remaining over the heads of employers and employees throughout the state.

If I can answer any questions, Iíd be delighted to.

COMMISSIONER DOMBROWSKI: Thank you, Mr. Simmons.

Just two comments, really, and to your last point. As one of the business groups that supported AB 60 in its final form when it was signed, I can tell you that we did not interpret any change in the language. And I agree totally with your analysis on this, that we assumed Mr. Cadellís position was what was being adopted by the Legislature. And in my viewpoint as the IWC -- as an IWC commissioner, we did not speak about this again because, as you said, we assumed it was the status quo. That is my personal viewpoint.

And I guess thatís as far as procedurally what we can do today. We canít take any action on this. I do propose -- well, Iíll wait on that -- but just for the transcript and for the record, thatís my personal viewpoint. And I couldnít agree with your comments more.

MS. BANE: I have a question, Mr. Simmons -- if thatís all right, Mr. Simmons.

Do you have anything clearly in mind as a vehicle for the IWC to accomplish this?

MR. SIMMONS: Well, I think there are several things you could do. What would be, I believe, wonderful initially is some expression from the commissioners as to what their intention was, so as to provide really to the DLSE and the public the benefit of that thought, namely, even without formal action, the DLSEís position was predicated on silence. I think if that silence ends -- because the DLSEís opinion says, "We have searched the record and have seen no expression of views from the commissioners on this" -- I think if we now eliminate that gap in the record, then that would be a good start.

I then think that the DLSE can, in effect, have the opportunity to reconsider whether it was accurate in rendering the opinion and rescind the opinion. And then the IWC will have the luxury of a greater amount of time to address it in the final analysis.

But something as simple as an expression of what the intent was by the commissioners who voted on the issue at the time would be beneficial. I think perhaps minutes of the IWC reflecting that intent would at least provide an historic record of what the intention was of the commissioners, and perhaps even a letter to the DLSE indicating that it appears that the opinion is incompatible with the intent of a majority of the commissioners at the time. All of that would be terrifically helpful.

I think it will also prevent the issue from going immediately to court.

MS. BANE: Thank you for that opinion.

COMMISSIONER DOMBROWSKI: Leslee.

COMMISSIONER COLEMAN: Let me also just say for the record that I agree strongly with Mr. Dombrowski. And as a commissioner that did vote on these wage orders, it was certainly not my intent that we would be reversing the previous practice of relying on the federal standard of considering salary by week.

So, thank you for your comments and I wholeheartedly agree with you in that sense.

MR. SIMMONS: Thank you.

COMMISSIONER DOMBROWSKI: Harold?

COMMISSIONER ROSE: I donít think that we can do anything today. I donít think it would be right. I believe that weíd put it on the agenda for the -- and have the appropriate notices, which is what? Thirty days?

MS. STRICKLIN: If you were going to have a meeting, that would be in 10 days, 10 daysí time. Thirty days really is for actually a hearing on the issue.

COMMISSIONER ROSE: So we could do it within 10 days.

MS. STRICKLIN: Yes.

COMMISSIONER ROSE: I would move such.

COMMISSIONER DOMBROWSKI: Well, I was thinking that our next step would be, after we hear all the testimony, to request that the Labor Commissioner and the chief counsel come and tell us what their interpretation was and their thinking was. And I guess, if that can be done in 10 days, then -- then I guess we can do it in 10 days.

MS. STRICKLIN: You want to set a meeting --

COMMISSIONER CREMINS: I think -- I think that -- that may make more sense. We usually donít issue interpretive bulletins, do we? Or --

MS. STRICKLIN: No.

COMMISSIONER DOMBROWSKI: No.

COMMISSIONER BOSCO: Well, you know, thereís a lot of issues in this letter. It isnít just one issue. Thereís, I think, many issues. And I think we would have to have the author of the letter here to be able to inquire of them. Certainly we have Mr. Simmonsí opinion, and I assume the other witnesses probably feel about the same. I wonder if weíre even wise to hear all the testimony today if weíre not going to do anything. I mean --

COMMISSIONER DOMBROWSKI: Well, I think people have come, so weíll let them talk. I donít think -- we have people on the other side too who want to talk, so I donít think it would be fair not to have that discussion.

Okay.

COMMISSIONER BOSCO: But may I ask something? You keep mentioning that you didnít solicit this opinion, but the letter itself indicates that itís in response to an email that you sent. Is that true? I mean, did -- this didnít just come out of the blue, did it?

MR. SIMMONS: Well, no. If I could have a minute, Iíll explain that, because I think it is somewhat interesting, what the genesis of the letter was.

I had heard rumblings that the DLSE was issuing piecemeal rulings on this subject in the form of email letters. When I heard that, I contacted Miles Locker, who, as I said, I have great respect for and had recently lectured with at the State Bar. And I asked him if it were true, and he said yes, it was true, and he explained to me some of the positions. I said, "I think that could be tragic." And he said, "Youíre overreacting." And I said, "Well, let me ask you a series of questions, then." I posed the first question, and he said, "Well, gee, we hadnít thought of that." And I posed another question, and he said, "Well, gee, we hadnít thought of that." And that involved some of the issues that they addressed in this letter.

At that point, Miles Locker graciously agreed to try to locate some of the email letters that they had issued to other people and then forwarded them to me by email that evening. When I read them, I realized that it would not be a good idea to allow these opinions to simply be sent to me without expressing my objection and opposition.

I then composed a quick email response in a matter of a couple of minutes indicating that I strongly disagreed with the opinions, that they were incompatible with decisions of the Ninth Circuit, the Department of Labor, and prior opinions that had been written to me. I also suggested that the issue was so significant that the public be provided an opportunity to address and comment on these issues before any final policy were articulated by the DLSE because this was an issue that would dramatically impact both labor and management.

So I did respond with an email response. That is what is referred to in the first line of the opinion as my email message --

COMMISSIONER BOSCO: Okay.

MR. SIMMONS: -- and later on referred to as a letter.

COMMISSIONER BOSCO: Okay. But I just wanted to be clear on that, that this isnít just a gratuitous -- all of a sudden, the department decided to issue this letter. They were responding to your email message wherein you expressed your opinion about various decisions or letters that they had previously -- I mean, your testimony seemed to indicate that, you know, nothing had happened and all of a sudden they just came out with this, which I think would be a different -- you know, it would certainly imply something different.

MR. SIMMONS: Oh, no. I didnít mean to imply that. I actually did receive the emails from Mr. Locker. I did respond to those emails, but I did it quite quickly. And I do need to note that I invited further dialogue on the subject because, in reality, I could have spent a lot longer time on a lot longer letter addressing the flaws I thought to exist in their policies.

COMMISSIONER DOMBROWSKI: Go ahead.

MS. BROYLES: Good afternoon, Mr. Chairman, members. Iím Julianne Broyles from the California Chamber of Commerce, here today certainly to add our voices to a number of other organizations who also have serious concerns regarding the memo released by the Division of Labor Standards Enforcement May 30th.

We are here to ask you in all seriousness to look at some way to restate or clarify the intent of the IWC when, in doing the implementation of the AB 60 process, that there was no change to Californiaís calculation process in terms of a weekís salary versus the monthís salary being put forth by the DLSE. We do ask you that, in some way, that -- whether it is sending a letter to the Division and to the Labor Commissioner clarifying your intent, or in some other fashion overriding that particular entire memo and the policies that were -- that they had contained.

Thereís a couple of reasons why weíre asking you to do that. Certainly, the significant impact on the California employer community is one that weíre very concerned about. You have both exempt workers and their companies who are harmed by the DLSE interpretation. And thatís really what it is, itís an interpretation.

And thatís especially true when you look at what the business community is trying to do in aiding all of California in terms of the energy problems that weíre -- supply problem that weíre having. Weíre not going to be able to shut down businesses for a temporary shutdown, whether itís a day or week or even longer, with this type of a memo hanging over our heads because, literally, our hourly workers will be sent home and their managers will be sitting alone in the dark with no one to watch over in a darkened facility, because of this particular ruling. Itís very costly, and itís also very wrong. It certainly goes in the wrong direction from where the business economy needs to go.

Our other concern about this particular memo is that certainly, in our opinion, violates the Tidewater decision. Now, Tidewater Marine Western v. Bradshaw, which was a 1996 court case, was very specific about the power of the Division of Labor Standards Enforcement to issue interpretation and opinion letters. It went directly to the heart of this particular memo. And what they actually required them to do, that the policy and procedure letters issued by the Labor Commissioner were clearly regulation because they had an impact on the entire or general population of employers, as clearly this particular memo does, as evidenced by the widespread employer anxiety and concern about the memo, and if that new position implements or interrupts or interprets -- excuse me -- or makes specific law enforced or administered by the agency, then it is, in fact, an underground regulation. And if they want to make it policy, they have to go through the entire APA, Administrative Procedures Act, procedures in order to institute such a significant change in policy and allow the public testimony and exposure to the -- to the public affected by such a ruling.

So, we do ask that the IWC act expeditiously to remove this from effect and in some way make sure that the Division of Labor Standards Enforcement knows that policy has not changed in California regarding their exempt workers.

Weíre also here because of the letter. And quite frankly, our concerns are really covered in our letter. I just want to highlight and add to the concerns that we raised and kind of stress some of the impact that we think it would have.

I represent manufacturing. Iíve spent most of my working life in manufacturing in one way or another prior to becoming a lobbyist. And just as a matter of practice, the fact that we have used this on the federal level, both in this state and several other states in which I have been the human resources person, is a common practice. And this certainly would upset the balance in California.

First of all, California is the largest manufacturing state in the Union. And we certainly would be put at another disadvantage because of this ruling. What really incensed and caused a lot of my members to start calling immediately upon learning about the letter is that theyíre frustrated about language that specifically indicated that in order for you to retain that exemption for exempt employees, the person has to perform -- has to receive his or her full salary for any month in which he or she performs any work, without regard to the number of days or hours worked. This is really, really huge. This leaves no leeway for anything, but it opens up even more items than Mr. Simmons had indicated. There are just tons of things that you can go on to from here.

For example, routinely manufacturers have had shutdowns -- itís been a history for longer than even Iíve been in the workplace. It is a common practice that a machine shop or fabricating shop, from which I come, from the steel industry, would shut down during the week of Christmas, following Christmas, sometimes even for New Yearís Eve. Thereís a myriad of reasons and times which this takes place. What is new to us now is the fact that weíre now coming upon an energy crisis, so to speak, and weíre going to see more of these. Some industries who were not accustomed or had this practice are now entertaining it because of legitimate business reasons having to do with energy, the lack thereof or the cost thereof. And this would certainly impact that negatively.

I believe it would be harmful to the economy as well as to those individual employees who are going to be impacted, because weíre asking them -- the government is asking employers to conserve energy as a way of helping to overcome and move through this energy crisis as we know it or as weíve heard. This is not going to be a way of encouraging; this is going to be discouraging businesses from wanting to participate in conserving energy in the State of California.

This also will have a negative impact on an employerís decision because itís going to not only discourage their participation, itís also going to create and further the inequity in compensation that itís going to create between employees. For example, the hourly employees who may be under contract, or even if theyíre just an hourly employee, when the plant goes down, thereís not a problem with you not paying that person. However, they know that the salaried employees who are not at work when the plant is completely shut down are going to be drawing pay. It further divides these two different categories of employees. And employees donít need that, whether theyíre organized or unorganized. We just donít further division between the labor force.

As a person who has responsibilities for managing the human resources aspect of employment, Richard -- Mr. Simmons had already indicated some of the things, but some of the items that he overlooked and all, there are pretty -- pretty big items. For example, by saying that even if you work one hour or one day of the month, you must be paid for the whole month, it brings to the question such things -- however silly they might sound -- what about the person that you hire on the 15th of the month? Are they entitled to a full monthís pay? It has no stop or end to it. So, what if you hire a person on the 15th of the month? Are you now obligated to pay them? Or what about the person who terminates or leaves on the 15th of the month? Are you obligated to pay them for the full month without regard to other provisions of your policy that may have some other kind of separation measure? This would call into question just the requirement to pay the person for the full month, regardless of the circumstances of termination.

What about other aspects of paid time that we deal with? Mr. Simmons referred to the jury duty. Well, what about those states -- not those states -- what about those counties that offer pay, travel, parking, and all of those things to employees who are there, where, in many instances, those are offset against the salary for some of those folks now? Should we now put the employer in the position and the employee of being paid his regular salary and at the same time also be reimbursed by the state?

And the same thing would be true for those people who are in the military. What if the person works the 1st and 2nd of the month and theyíre called on active duty for 30 days and theyíre now gone? They draw a full military salary for those 30 days. Is the employer on the hook to pay the full salary for those remaining days of the month because the individual had worked one day?

I mean, this could go on and on and on. There is no end to the number of situations that this particular ruling creates. And itís for that reason I just wanted to tag on some of the things that have not even been asked yet, much less answered, and that is imperative that we do something to bring this under control so the employers can get back in the business of trying to manage their production costs and trying to stay in business.

So I would urge you to take whatever action -- and I would concur with Mr. Simmonsí recommendation -- that you fill this void and that you take the opportunity to make sure that there is no area to be interpreted by the Labor Commissioner, and then we can rid ourselves of this really adverse letter for the employer community.

Thank you.

MS. MILTON: Good afternoon, Mr. Chair and members. Kelly Milton, on behalf of the American Electronics Association, representing over 1,500 high-tech companies in California.

Iíll be very brief so as to not be too repetitive of previous testimony. But I just wanted to stress that AEA thoroughly agrees with the issues brought forth in the testimony of Mr. Simmons, Ms. Broyles, and Mr. Washington.

I would also like to again stress that the cost-cutting measures being used by businesses, including asking employees to use accrued vacation time or taking time off without pay during a temporary shutdown, are being utilized in an effort to avoid employee layoffs, or, even worse, business closure. These temporary shutdowns are increasingly a result of shortages of energy supply as well as theyíre being used as an option during seasonal slowdowns and holiday periods.

At a time where our state is facing an ongoing energy crisis and a delicate economic environment, it is important to protect the California worker from potential job loss. These innovative cost-cutting measures do just that.

AEA respectfully requests clarification on this matter by the IWC, and we again ask you to act expeditiously on this matter.

Thank you.

MR. EWERT: Mr. Chair, members of the committee, my name is Jim Ewert. I represent the California Newspaper Publishers Association, representing about 500 daily and weekly newspapers in the State of California. And while my larger members are very concerned about this, itís my smaller members that would be the most impacted by this.

Not to be repetitive, again, our three main concerns, as already outlined by Mr. Simmons -- and we agree with all of the comments of the previous speakers -- are responses to not only pending blackouts, but other types of things that would cause businesses to shut down. Natural disasters -- we even a plane in an Oroville newspaper that crashed into a facility and put it out for about three weeks till they could come up for production again at a different facility, and they had to scramble. We had one newspaper member that had to deal with toxic mold at its facility, and its staff was completely moved. These are the kinds of issues that arise from time to time for every California business. And our newspaper members are already trying to figure out how to deal with these types of things.

Weíre also concerned about vacation pay, which is an integral part of getting good people to work for our industry, as well as performing civic duties such as jury duty and serving as witnesses in trials, which newspaper reporters and editors are often called to do from time to time.

As the other speakers also requested, we would like to see some clarification of this as expeditiously as possible. Weíd also urge you to use whatever mechanism you have at your disposal to encourage the suspension or the delay of the implementation of this opinion by the Labor Commissioner.

Thank you very much.

COMMISSIONER DOMBROWSKI: Okay. Thank you.

I have three other cards, Tom Rankin -- who I donít believe is here -- Theodore Franklin, and Patricia Gates.

MS. GATES: Iíd like to say at the outset my name is Patricia Gates. Iím with the Van Bourg office, and Iíve appeared here before. As a matter of fact, the court reporter told me she has a macro on my name now.

(Laughter)

MS. GATES: Iím not sure how to take that.

I want to say first that Mr. Rankin had asked me if I would speak on his behalf. He had another meeting to go to. And since this matter was not noticed in any way to the public, none of us knew that the matter was going to be heard in any way today. Weíre relieved to hear that no action is contemplated today.

But what concerns me, I think, first and foremost, is while the prior speakers were articulate in their defense of the employer position on this, they never articulated what we were talking about. And what weíre talking about, when one of the speakers said that, you know, people would like to take time off over 4th of July, what theyíre asking is that people be forced to take vacation time over 4th of July, and if they donít have vacation time, they take it off without pay.

And the workers that theyíre talking about, these are not the hourly paid people. These are the people who are salaried people, whose salaries are supposed to reflect those ups and downs. And that is the quid pro quo of a salary. And while one of the speakers went on to talk about, you know, allying with the hourly people and creating solidarity in the workforce, I find that a little bit disingenuous because salaried people, in fact, always enjoy different privileges. And one of those privileges is, generally speaking, to get paid the same -- well, they -- one of the privileges and some of the duties -- and one of the duties is that when thereís a lot of work to be done, they work 70 and 80 hours a week without overtime. And the quid pro quo is when work slows down, they donít get penalized.

And these speakers who have spoken today are proposing that when work slows down, they get penalized. And I think that what -- while theyíve -- while they have couched it in many interesting and legalistic arguments, what theyíre saying is in California, they want salaried people to have to absorb the ups and downs, but not -- thereís no requirement than an employee, when they make more hours, when theyíre salaried, get more money. The only requirement that exists for employees to get more money is the overtime requirement. And the only -- the only issue thatís really being addressed in all this is whether these folks get overtime or not, and whether or not they lose their overtime exemption. These exemptions are supposed to be narrowly construed in favor of the working person, not against them. And this Commission is supposed to look very carefully at whether proposals that come before it benefit the welfare of working people.

So Iím here today to say that, on behalf of the California Labor Federation, that they are strongly opposed -- the Federation is strongly opposed to any consideration of actually passing off to the salaried employees those downward fluctuations in time that occur in a workplace when work slows down.

I think that another issue -- I know that youíre planning to have Mr. Locker here to speak to you, and Iím glad to hear that youíre doing that, because although Mr. Simmons claims to respect him, he starts out by implying, as Mr. Bosco or Commissioner Bosco pointed out, implying that Mr. Locker sent the letter unsolicited to him. In addition, I think that Mr. Locker has been entirely consistent. And if you look at his opinion from December -- that was published on the Web site December 23rd, 1999, at that time, on Page 13 of the decision, he says:

"The legislative intent in switching from Ďremunerationí to Ďsalaryí was to explicitly adopt the federal salary basis test to the extent that it is consistent with California wage and hour law."

He also says in that letter:

"Section 515(a)ís requirement of a monthly salary equivalent to no less than two times -- to be paid at no less than two times the state minimum wage for full-time employment simply serves to set the amount of the required monthly salary as a multiple of the minimum wage, and not to permit reductions of this monthly threshold salary for employees who work less than 40 hours per workweek.

It was never contemplated that there would be reductions if a salaried employee worked less than 40, by some fluke. The thought is, is that when that employee worked 60 or 70, that was how that balances. That is the quid pro quo.

Iíd also like to say that although I didnít bring it with me today, on my desk, in my in-box yesterday was a newsletter from an employer organization. And the newsletter said itís actually very simple: if your employees are hourly and you dock their pay, thatís legal; if theyíre salaried and you dock their pay for times that the employer does not make work available, thatís illegal. And I think thatís a clear statement of what the law is now. I donít think itís nearly as complicated as the prior witnesses would like you to believe.

I also think, finally -- and I hope that youíll consider this before you -- before you hear any more about it -- that while Mr. Simmons cleverly suggests that a simple clarification is all thatís necessary, heís asking that you regulate. And this boardís regulation power comes through the wage board process. This board is exempt from the APA and from review by the Office of Administrative Law, but this Commission still has a process by which it proceeds. And that process is something that people who follow the work of this Commission count on and expect. And itís a process thatís been set out in law and in regulation.

And if the -- one other time -- I donít -- I was not here on these administrative, executive, and professional issues when I appeared before. I was always appearing on hourly workersí behalf. But one thing that I heard a lot of discussion about -- and this went on from November of 1999 until June 30th, I think, was the last meeting, of 2000 -- and this was the implementation phase of AB 60. And this Commission heard argument after argument about how California was being more protective than the federal law, how California wage and hour law was deviating and was offering greater protections to California workers than federal law. And, in fact, I remember that some regulations under the CFR were adopted and others were rejected on the basis that it did not meet the stricter California standard.

And I just have to point out that there were two Supreme Court decisions in the last two years analyzing California wage and hour law. And quoting directing from the Morillion v. Royal Packing case, the court said:

"Moreover, our departure from the federal authority is entirely consistent with the recognized principle that state law may provide employees greater protection than the FLSA. IWCís wage orders, although at times patterned after federal regulations, also sometimes provide greater protection than is provided under federal law."

COMMISSIONER DOMBROWSKI: But, Ms. Gates, the point Mr. Simmons was making and the point Iím making is that for years, California law has been consistent with federal law on this issue. Mr. Cadell, who I think you would agree served well for the state for a number of years, issued the opinion letter that said that. The enforcement policy said that. You know, all of a sudden the chief counsel does a 180, and Iíd like to hear why.

MS. GATES: Well, I think youíre entitled to hear why, but I believe, Commissioner Dombrowski, that the 180 was created by AB 60.

COMMISSIONER DOMBROWSKI: Why?

MS. GATES: AB 60 stated in clear terms that the salary test would be a monthly salary test, not a monthly remuneration test.

COMMISSIONER DOMBROWSKI: "Monthly" was in the regulations well before AB 60. Cadell made his interpretation based on that same language. The only change that went into AB 60 from the reg stage to legislation was "remuneration" was changed to "salary." "Monthly" was always there. That -- meanings of words donít change because they go from regulation to statute. Thatís what we need to hear about from Miles, where is he coming from, because also in AB 60 -- and I donít have the sections in front of me, but we do have the point where itís defining full-time employment by 40 hours per week.

So we need to get some answers.

MS. GATES: And what I would suggest, that when the answers are forthcoming, that this Commission be constrained and that legal counsel review what the options are for this Commission to act, because itís been my opinion --

COMMISSIONER DOMBROWSKI: We havenít even started to go there.

(Laughter)

MS. GATES: And I want -- and I canít help but draw on history for one other example here. I sat in this room and listened to hours and hours of testimony from the high-tech industry about the need for computer -- an hourly exemption for computer employees. And we were told that most of the employees that worked in that industry were not, in fact, salaried, they were being paid an hourly rate, and they needed relief from hourly overtime.

Now I see this as part of that same process, of employers coming to you asking for advantages that basically put more profit in their column and pass off more of the job to --

COMMISSIONER DOMBROWSKI: I have to disagree. The employers arenít coming here asking for anything but what they thought was a status quo. Thatís what theyíre asking. Miles has changed the rule here. The employers, they just want what they had.

MS. GATES: Well, I think that Mr. Locker was basing his interpretation on AB 60 and the monthly salary test thatís expressed there.

COMMISSIONER DOMBROWSKI: Well, weíll wait and have Mr. Locker.

COMMISSIONER CREMINS: One quick question. The testimony prior to you mentioned an emergency situation where a plant had been shut down due to a plane accident or something like that. Do you envision or contemplate anything in the statute that allows alteration of salary pay because of a major emergency like that, if a plant is shut down through no fault of the employer?

MS. GATES: Itís when the -- when the employees stand ready and willing to work and the employer -- and the employer does not provide work is the circumstance under which they cannot dock their salaried employeesí pay. And thatís -- I think the standard is true. And the real issue about it that this Commission is considering is whether the docking can occur on a weekly basis or on a monthly basis. And I think that Mr. Lockerís opinion states that if -- because of the monthly salary test, that if you offer work to your salaried employees during the month of July, for instance, and then you withdraw that offer of work sometime during the month of July, that you either have to pay them their salary for the whole month or you have to convert them to hourly paid employees and pay them overtime in case they worked 60 hours during the first two weeks of the month of July.

COMMISSIONER DOMBROWSKI: Iím going to try to find this job that pays twice the minimum wage and requires you to only work one day a week and youíll be exempt, because under Miles -- and youíll get paid for the whole month then, just for that one day.

MS. GATES: But you make $1,666 a month.

COMMISSIONER DOMBROWSKI: Two thousand or something, yeah.

Sorry. Go ahead.

MR. FRANKLIN: Yes. Ted Franklin, also from the Van Bourg law firm, and speaking on behalf of the California Labor Federation.

In the parade of terribles that Mr. Simmons presented, there were many things that will be addressed in a future meeting. I just wanted to speak to one brief issue, which is the issue of retroactivity and the danger of lawsuits, a proliferation of litigation.

It is clear in the letter from Mr. Locker that the DLSEís position is that the exemption would not be applicable -- that where a deduction is not permitted by these interpretations and had been inadvertently or erroneously made, but in good faith, there would be an opportunity to cure. So weíre not looking at a situation where there is some huge backlog of litigation thatís going to be loosened up by this interpretation.

COMMISSIONER BOSCO: Could I ask some?

COMMISSIONER DOMBROWSKI: Go ahead.

COMMISSIONER BOSCO: It seems to me that about 60 percent of this issue is -- can be encompassed in this question, and that is that, assuming that an exemption is lost during the course of a period of time, say a month, when can it be reinstated again? What is your understanding of that? Mr. Simmons indicated that it may be lost forever, which seems unlikely, and it may be lost for everybody, which to me seems unlikely too, although Iím not challenging him. He knows far more about this area of labor law than I do. But what is your opinion on that? When do you get back the exemption if, say, on the 4th of July you let everybody off for a week and so, say, all the rest of July they fall back and you owe them overtime and everything else. Is it August? Can you then start to call them salaried exempt employees again?

MS. GATES: I think there is a process for rehabilitating or re-establishing a salaried employee as a salaried employee. And my understanding -- and this is based only on a conversation that I had with a practitioner in this field -- I donít practice particularly in this area of administrative, executive, and professional exemptions, other than seeing that theyíre not misapplied to production workers -- but my understanding is that -- that it can be cured on a monthly basis, that if you -- that if you have inadvertently misclassified or inadvertently deducted, and therefore lost your exemption from overtime, that the following month, you can reclassify as a salaried employee the person who was unlawfully deducted from as a salaried employee. I understood it to happen on a monthly basis.

COMMISSIONER BOSCO: Well, this is not inadvertent. It would be advertent. But I donít know if thereís a difference -- if it would create a difference. In other words --

MS. GATES: I know there are federal regulations that allow for that. Whether California has adopted those particular federal regulations or not, Iím not certain.

COMMISSIONER DOMBROWSKI: Just think how the employer feels.

COMMISSIONER BOSCO: I would like to -- you know, I think probably everybody on the Commission would like to have Mr. Locker here to -- you know, to inquire of on a number of issues. But thatís certainly one that I would want to have the answer to, and that is when can you reinstate an employee as an exempt employee, because if you can do it the beginning of the next month or next 30-day period or -- and I think the point was well made, we donít know what a month is -- if you can do it then, it seems like the damage, if you want to call it that, would be much more contained, the period of time that the exemption would be lost and you might owe them overtime.

It might not. I mean, maybe an employee wouldnít work overtime the rest of that month. I mean, thatís another issue. Thereís lots of issues.

But, anyway, that -- it seems to me, then, that it would be much more of a confined issue if the exemption could be reinstated fairly rapidly.

MS. GATES: Commissioner Bosco, you make a good point in that if work has slowed down, and if thatís one of the reasons for the employer ceasing to offer work, chances are thereís going to be no overtime liability in that month. Youíre correct.

COMMISSIONER BOSCO: And another thing too. Iím very sympathetic to the manufacturers and this industry, and I know they have a history of doing this. But we want to be awfully careful this doesnít spill over to, you know, everything else, to where, you know, the whole -- people get laid off for a week, and then they become nonexempt, and then theyíre forced to work much harder the other three weeks to make up for the one they were laid off.

I mean, this -- we really should have Mr. Locker here.

COMMISSIONER DOMBROWSKI: Weíll have Mr. Locker. But my view is that, you know, we had the situation the employers are asking for, up until Milesí letter came out on May 30th. And we didnít have those abuses. And thatís been over decades. So I think the real world has already told us that employers are not going to abuse the -- what was the status quo.

Any other comments?

MS. GATES: No.

COMMISSIONER DOMBROWSKI: Thank you.

MS. GATES: Thank you.

COMMISSIONER DOMBROWSKI: Iím going to suggest, then, that we schedule a meeting for Friday, June 29th. Does that work?

COMMISSIONER ROSE: Fine with me.

COMMISSIONER DOMBROWSKI: And I guess weíll just decide the location later.

Is that enough time? You have to have 10-day notice?

MS. STRICKLIN: Yes.

COMMISSIONER DOMBROWSKI: That gives you enough time, right?

MS. BANE: Yes.

COMMISSIONER BOSCO: I was told that after we did the AB 60 implementation, this Commission wouldnít have any more controversial issues.

COMMISSIONER DOMBROWSKI: I thought that too. I thought that too, yeah. I thought that too.

COMMISSIONER ROSE: And at that meeting -- at that meeting, we will have Miles --

COMMISSIONER DOMBROWSKI: Have Miles, and Art Lujan, if he so chooses, to come in and explain.

COMMISSIONER ROSE: And Iím sure these folks.

COMMISSIONER DOMBROWSKI: Yeah, and anyone else. Yeah, anyone else who has -- Iím sure it will be a big room that weíll need.

COMMISSIONER ROSE: Can we have a copy of the letter?

COMMISSIONER DOMBROWSKI: Yeah. Yeah.

Yeah, Bridget. We need --

MS. BANE: Weíll supply a copy of the letter from Mr. Locker and any other relevant documents.

COMMISSIONER DOMBROWSKI: And the Cadell letter, and the -- well, thatís --

MS. BANE: Absolutely, we will, and --

COMMISSIONER ROSE: That will be the only subject at that meeting. Is that correct?

COMMISSIONER DOMBROWSKI: Yes. Yes.

MS. BANE: I would like to suggest that you allow staff and counsel to prepare a letter for your consideration for Mr. Dombrowski to send to invite Mr. Locker, and perhaps to delineate some issues.

COMMISSIONER DOMBROWSKI: Sure. Sure.

Okay. All right. Any other business?

(No response)

COMMISSIONER DOMBROWSKI: I need a motion to adjourn.

COMMISSIONER ROSE: Move we adjourn.

COMMISSIONER DOMBROWSKI: Second?

COMMISSIONER CREMINS: Second.

COMMISSIONER DOMBROWSKI: All in favor, say "aye."

(Chorus of "ayes")

(Thereupon, at 1:12 p.m., the public

meeting was adjourned.)

--o0o--

CERTIFICATE OF REPORTER/TRANSCRIBER

--o0o--

I, Cynthia M. Judy, a duly designated reporter and transcriber, do hereby declare and certify under penalty of perjury under the laws of the State of California that I transcribed the three tapes recorded by me at the Public Meeting of the Industrial Welfare Commission, held on June 15, 2001, in San Francisco, California, and that the foregoing pages constitute a true, accurate, and complete transcription of the aforementioned tape, to the best of my ability.